RESTRICTED

WT/TPR/S/310

19 January 2015

(15-0296) Page: 1/129

Trade Policy Review Body

TRADE POLICY REVIEW

REPORT BY THE SECRETARIAT

JAPAN

This report, prepared for the twelfth Trade Policy Review of Japan, has been drawn up by the WTO Secretariat on its own responsibility. The Secretariat has, as required by the Agreement establishing the Trade Policy Review Mechanism (Annex 3 of the Marrakesh Agreement Establishing the World Trade Organization), sought clarification from Japan on its trade policies and practices.

Any technical questions arising from this report may be addressed to Ricardo Barba Viniegra (tel.: 022 739 5088) and John Finn (tel.: 022 739 5081).

Document WT/TPR/G/310 contains the policy statement submitted by Japan.

Note: This report is subject to restricted circulation and press embargo until the end of the first session of the meeting of the Trade Policy Review Body on Japan. This report was drafted in English. WT/TPR/S/310 • Japan

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CONTENTS SUMMARY ...... 8 1 ECONOMIC ENVIRONMENT ...... 11 1.1 Recent Economic Developments...... 11 1.2 Trade Performance and FDI ...... 14 1.2.1 Trade in goods and services ...... 14 1.2.2 Foreign direct investment...... 16 1.3 Outlook ...... 17 2 TRADE AND INVESTMENT REGIME ...... 19 2.1 General Framework ...... 19 2.2 Trade Policy Objectives ...... 21 2.3 Trade Agreements and Arrangements ...... 21 2.3.1 WTO ...... 21 2.3.2 Regional and preferential agreements ...... 21 2.3.3 Other agreements and arrangements ...... 22 2.4 Investment Regime ...... 23 3 TRADE POLICIES AND PRACTICES BY MEASURE ...... 26 3.1 Measures Directly Affecting Imports ...... 26 3.1.1 Customs procedures and requirements ...... 26 3.1.2 Customs valuation ...... 26 3.1.3 Rules of origin ...... 27 3.1.4 Tariffs ...... 27 3.1.4.1 MFN applied tariff ...... 27 3.1.4.2 Bound tariff ...... 31 3.1.4.3 Preferential tariff ...... 31 3.1.5 Import prohibitions, restrictions, licensing, and quotas ...... 32 3.1.6 Contingency trade measures ...... 33 3.1.7 Standards and other technical requirements ...... 33 3.1.8 Sanitary and phytosanitary measures ...... 38 3.1.9 Labelling and packaging requirements ...... 40 3.1.10 Government procurement ...... 41 3.2 Measures Directly Affecting Exports ...... 43 3.2.1 Export procedures and requirements ...... 43 3.2.2 Export taxes, charges, and levies ...... 44 3.2.3 Export prohibitions, restrictions, and licensing ...... 44 3.2.4 Export support and promotion ...... 46 3.3 Measures Affecting Production and Trade ...... 47 3.3.1 Taxes ...... 47 3.3.1.1 Income tax ...... 48 3.3.1.2 Corporation tax ...... 49

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3.3.1.3 Corporation tax-based incentives ...... 49 3.3.1.4 Consumption tax ...... 50 3.3.1.5 Local taxes ...... 50 3.3.1.6 Excise duties ...... 51 3.3.1.7 Tax treaties ...... 52 3.3.2 Subsidies and support ...... 52 3.3.3 State-owned enterprises ...... 53 3.3.4 Competition policy ...... 56 3.3.4.1 Recent developments ...... 56 3.3.4.2 Exemptions from prohibition of cartels ...... 56 3.3.4.3 Holding companies, and mergers and acquisitions ...... 57 3.3.4.4 International arrangements ...... 57 3.3.4.5 Enforcement ...... 57 3.3.5 Intellectual property rights (IPRs) ...... 58 3.3.5.1 Overview ...... 58 3.3.5.2 Patents ...... 60 3.3.5.3 Utility models (UMs) ...... 63 3.3.5.4 Designs ...... 63 3.3.5.5 Trademarks ...... 64 3.3.5.6 Geographical indications (GIs) ...... 65 3.3.5.7 Copyright ...... 65 3.3.5.8 Enforcement ...... 65 4 TRADE POLICIES IN SELECTED SECTORS ...... 68 4.1 Agriculture ...... 68 4.1.1 Trade ...... 70 4.1.2 Agricultural policies ...... 71 4.1.2.1 Legal and institutional framework ...... 71 4.1.2.2 Trade policies ...... 73 4.1.2.3 Domestic support ...... 74 4.1.2.3.1 General support programmes ...... 74 4.1.2.3.2 Rice ...... 75 4.1.2.3.3 Other cereals, sugar beet and starch potatoes ...... 75 4.1.2.3.4 Fruits and vegetables ...... 76 4.1.2.3.5 Tobacco ...... 76 4.1.2.3.6 Livestock products ...... 77 4.1.2.3.7 Dairy ...... 77 4.1.2.4 Support levels ...... 78 4.1.2.4.1 WTO notifications ...... 78 4.1.2.4.2 OECD indicators ...... 79 4.2 Fisheries ...... 82

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4.2.1 Features ...... 82 4.2.2 Trade ...... 84 4.2.3 Policy ...... 85 4.2.3.1 Reconstruction ...... 87 4.2.3.2 Stock management ...... 87 4.2.3.3 International agreements ...... 88 4.2.3.4 Support for fisheries ...... 88 4.3 Energy ...... 89 4.3.1 Features ...... 89 4.3.2 Electricity ...... 90 4.3.2.1 Features ...... 90 4.3.2.2 Policy and legislation ...... 92 4.4 Finance ...... 93 4.4.1 Features ...... 93 4.4.2 Banking ...... 95 4.4.3 Insurance ...... 96 4.4.4 Securities ...... 97 4.4.5 Pension and mutual funds ...... 99 4.5 Telecommunications ...... 100 4.5.1 Features ...... 100 4.5.2 Policy and legislation ...... 100 4.6 Transport ...... 103 4.6.1 Maritime transport ...... 103 4.6.2 Air transport ...... 106 4.6.3 Rail transport ...... 109 REFERENCES ...... 112 5 APPENDIX TABLES ...... 116

CHARTS

Chart 1.1 Product composition of merchandise trade, 2011 and 2013 ...... 15 Chart 1.2 Direction of merchandise trade, 2011 and 2013 ...... 16 Chart 3.1 Tariff distribution by type of duty, FY2014 ...... 29 Chart 3.2 Share of non-ad valorem duties, by HS section, FY2014 ...... 29 Chart 3.3 Simple average applied MFN tariff rates, by HS section, FY2012 and FY2014 ...... 30 Chart 3.4 Flowchart of JIS developing process ...... 37 Chart 3.5 Flowchart of JAS developing bodies ...... 37 Chart 3.6 Structure of IPR administration and enforcement ...... 59 Chart 3.7 Flowchart for patent applications ...... 61 Chart 3.8 Procedure for registering a trademark ...... 64 Chart 4.1 Trade in agriculture, 2004-13 ...... 70

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Chart 4.2 Support notified to the WTO Committee on Agriculture, FY2003-12 ...... 78 Chart 4.3 Green Box support, FY2003-12 ...... 79 Chart 4.4 Amber Box support, FY2003-12 ...... 80 Chart 4.5 Value of production and support to agriculture, 2001-13 ...... 81 Chart 4.6 Electricity regions, peak demand and interconnections, 2012 ...... 91

TABLES

Table 1.1 Selected macroeconomic indicators, 2009-13 ...... 12 Table 1.2 Balance of payments, 2009-13 ...... 13 Table 1.3 Foreign direct investment, 2009-13 ...... 17 Table 2.1 Major trade-related laws and regulations, October 2014 ...... 19 Table 2.2 Trade agreements concluded by, not yet in force and under negotiation ...... 22 Table 2.3 Bilateral investment treaties in force ...... 24 Table 2.4 Tax conventions ...... 24 Table 3.1 Structure of MFN tariffs, FY2010, FY2012 and FY2014 ...... 28 Table 3.2 Summary analysis of Japan's preferential tariffs, FY2014 ...... 31 Table 3.3 Main laws on standards and technical regulations ...... 34 Table 3.4 JIS established, revised, and withdrawn, April 2013-March 2014 ...... 36 Table 3.5 Principal laws on SPS measures ...... 39 Table 3.6 Procurement by product and by origin, 2011 and 2012 ...... 43 Table 3.7 Principal legislation affecting exports ...... 44 Table 3.8 NEXI insurance activity, FY2009-13 ...... 46 Table 3.9 JBIC lending and investments, FY2009-13 ...... 47 Table 3.10 JBIC funding sources, FY2009-12 ...... 47 Table 3.11 Tax revenue, FY2009-13 ...... 48 Table 3.12 Maximum rates of enterprise taxes ...... 51 Table 3.13 Excise duties ...... 51 Table 3.14 State trading enterprises notified to the WTO under Article XVII ...... 54 Table 3.15 Aggregate data on State-owned enterprises in Japan ...... 54 Table 3.16 Large state enterprises, FY2013 ...... 55 Table 3.17 Exemptions under the Anti-Monopoly Act and individual laws ...... 56 Table 3.18 Enforcement of competition policy, 2009-13 ...... 58 Table 3.19 Principal legislation relating to IPRs ...... 59 Table 3.20 Patent applications and patents granted, 2005-13 ...... 62 Table 3.21 Utility models applications and registrations, 2005-13...... 63 Table 3.22 Design applications and registrations, 2005-13 ...... 63 Table 3.23 Trademark applications and registrations, 2005-13 ...... 65 Table 3.24 Seizure of imports, 2009-13 ...... 66 Table 4.1 Agriculture in the economy, 2004-12 ...... 68 Table 4.2 Farm households and average farm size, 2010-13 ...... 69

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Table 4.3 Total agricultural production and production of selected products, 2003-12 ...... 69 Table 4.4 Imports of agricultural products, 2006-13 ...... 70 Table 4.5 Exports of agricultural products, 2006-13 ...... 71 Table 4.6 Imports under the SBS system, FY2009-11 ...... 74 Table 4.7 Payment rates for other cereals, sugar beet, and starch potatoes ...... 76 Table 4.8 Administered prices for calves, beef, and pig meat, FY2014 ...... 77 Table 4.9 Total producer support estimate and single commodity transfer values for selected commodities, 2004-13 ...... 81 Table 4.10 Fish in the economy, 2005-13 ...... 82 Table 4.11 Fisheries production, 2004-12 ...... 83 Table 4.12 Fisheries landings in Japan, 2005-12 ...... 84 Table 4.13 Aquatic mammals taken by Japan, 2005-12 ...... 84 Table 4.14 Structure of fisheries, 2004-12 ...... 84 Table 4.15 Imports of fish products, 2006-13 ...... 85 Table 4.16 Exports of fish products, 2006-13 ...... 85 Table 4.17 Government transfers to fishing, 2005-11 ...... 88 Table 4.18 Total primary energy supply, 2005-12 ...... 90 Table 4.19 Production and consumption of electricity, 2005-12 ...... 90 Table 4.20 Power production in Japan in FY1994 and FY2012 ...... 91 Table 4.21 Maritime transport, main economic indicators, June 2012 ...... 103 Table 4.22 Trade-related maritime transport policies ...... 105 Table 4.23 Bilateral air transport agreements, 2014 ...... 108 Table 4.24 Railway transport in Japan, FY2011 ...... 109 Table 4.25 JR Group, FY2013 ...... 110

BOXES

Box 3.1 Agencies in charge of TBT issues ...... 35 Box 3.2 Key agencies responsible for SPS measures ...... 39 Box 4.1 Market and regulatory regime for financial services, general overview ...... 94 Box 4.2 Market and regulatory regime for banking ...... 95 Box 4.3 Market and regulatory regime for insurance ...... 97 Box 4.4 Market and regulatory regime for securities ...... 98 Box 4.5 Market and regulatory regime for pension funds and mutual funds ...... 99 Box 4.6 Market structure and regulatory regime for telecommunications sector, 2013 ...... 101 Box 4.7 Japan's market and regulatory regime for air transport subsectors, 2014...... 107 Box 4.8 Regulatory framework for railway transport in Japan, 2012 ...... 111

APPENDIX TABLES

Table A1. 1 Merchandise exports by product groups, 2009-13 ...... 116

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Table A1. 2 Merchandise imports by product groups, 2009-13 ...... 117 Table A1. 3 Merchandise exports by destination, 2009-13 ...... 118 Table A1. 4 Merchandise imports by origin, 2009-13 ...... 119

Table A2. 1 WTO dispute settlement cases active 1 January 2011–31 December 2014 ...... 120 Table A2. 2 Selected notifications under WTO Agreements (1 January 2012- 7 October 2014) ...... 123

Table A3. 1 Japan's tariff summary, FY2014 ...... 125 Table A3. 2 Incorporated administrative agencies by government office ...... 126

Table A4. 1 Special safeguard, FY2011 to 2013 ...... 128

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SUMMARY

1. Since December 2012, Japan has been implementing an ambitious reform programme to overcome deflation and revitalize its economy after more than a decade of sluggish performance. The programme consists of a "three arrows strategy": monetary easing (2% inflation target to be achieved at the earliest possible time mainly through the expansion of the monetary base); fiscal stimulus (about US$100 billion in January 2013 and an extra US$53 billion in December 2013 in an attempt to boost growth); and structural reforms in areas such as agriculture, energy and healthcare which will take longer to be implemented, not least because the reforms require legislative and administrative changes that take time to prepare.

2. The expansionary monetary and fiscal policy measures adopted since the last review have supported Japan's economy but have been insufficient to achieve strong economic growth. Indeed, Japan's real GDP growth is estimated at 0.9% for 2014 (down from 1.5% both in 2012 and 2013). The authorities recognize that far-reaching structural reforms are necessary to address long-standing structural problems and achieve sustainable growth in the future. While some steps have been taken in this regard, more is needed including further trade and investment liberalization measures so as to encourage private investment, increase productivity, and enhance competitiveness.

3. Since 2011, Japan has had a persistent trade deficit, the longest since comparable records began. In 2013, Japan had its biggest annual trade deficit (US$118 billion), although exports increased in U.S. dollar terms while imports grew to their highest-ever level. Increased imports of fossil fuels were a major factor in the rise in imports as they replaced energy from nuclear power following the accident at the Fukushima nuclear plant in 2011 and the subsequent shut-down of other nuclear power plants.

4. Japan's FDI inflows continue to be lower than in other major developed economies and the Japan Revitalization Strategy sets a target of doubling FDI by 2020. To achieve this, Japan is to expand the use of public-private partnerships, while private finance initiatives in infrastructure projects are envisaged over the next ten years. Japan is the second-largest outward direct investor in the world, particularly in certain ASEAN countries where subsidiaries of Japanese companies often play a leading role in sectors such as autos and electronics.

5. Japan's current network of 13 regional trade agreements (RTAs) in force is the same as at the time of its previous review. Under these agreements, Japan has excluded some sensitive agricultural and related products, notably certain tariff lines for meat and meat products, fish and fish products, dairy products, rice, products of the milling industry, plywood, leather and products thereof, and footwear. Some of these products are also excluded from Japan's Generalized System of Preferences (GSP) scheme.

6. During the review period, an RTA with Australia was signed, and another was reached in principle with Mongolia. In addition, Japan is in negotiations with: Canada; Colombia; China; the European Union; the Gulf Cooperation Council (GCC); the Republic of Korea; and Turkey. Moreover, Japan is part of the Trans-Pacific Partnership (TPP) negotiations and the Comprehensive Regional Economic Partnership Agreement. Japan aims to increase its trade under RTAs from around 19% in 2013 to 70% by 2018.

7. In general, Japan's trade policies during the review period have remained relatively stable while it has been actively negotiating RTAs, pursuing domestic reforms to improve its competitiveness, and participating in work in the WTO.

8. Japan's overall simple average applied MFN tariff rate declined from 6.3% in FY2012 to 5.8% in FY2014 due to higher unit prices for many agricultural products which reduced the ad valorem equivalents (AVEs). Thus, the simple average for agriculture (WTO definition) is 14.9% (down from 17.5% in FY2012), and 3.7% for non-agricultural products (the same as in FY2012).

9. Japan has bound 98.3% of its tariff (159 lines are unbound). The difference between the average bound MFN tariff (5.9%) and the average applied MFN tariff (5.8%) in FY2014 was negligible, which reflects a high degree of predictability in the tariff. However, the average bound

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10. Japan makes relatively little use of contingency trade remedies. It applied neither countervailing or safeguard measures during the review period and has only one anti-dumping duty in force on electrolytic manganese dioxide originating from China, South Africa, and Spain. The period of imposition was extended by five years and will expire on 5 March 2019. In 2014, Japan initiated an anti-dumping investigation on toluenediisocyanate from China.

11. For a variety of reasons, Japan's SPS and TBT requirements are often more strict than international standards and the cost of meeting its quality and safety standards can be high. As at 31 March 2014, there were 10,525 Japanese Industrial Standards (JIS), 5,823 of which correspond with international standards, and 97% of JIS had been harmonized with identical or modified international standards. Japan currently imposes import prohibitions on beef and poultry from various countries to prevent the spread of some animal diseases, including BSE and avian flu.

12. Japan made some changes to its government procurement framework, basically to preclude from participation in open tendering parties who, inter alia, intentionally execute construction works or services with poor workmanship, or overcharge by false reporting contracts. Japan also recently lowered some of its thresholds for goods and services under the GPA.

13. The Anti-Monopoly Act was amended in December 2013, inter alia, to abolish the hearing procedure of the Japan Fair Trade Commission (JFTC) for administrative appeals. Once the Act comes into force, any appeal regarding decisions of the JFTC will be subject to the exclusive jurisdiction of the Tokyo District Court with a view to ensuring expertise and enhancing procedural fairness.

14. The main developments regarding Japan's Intellectual Property Rights (IPR) framework were the strengthening of copyright protection in the digital environment, introducing trademark protection for non-traditional marks, improving the efficiency of the patent system, and an important judicial decision on the protection of standard essential patents. Japan remains an active participant in multilateral fora regarding harmonization of regimes protecting IPRs.

15. Despite changes in agricultural programmes over the past few years, support and protection given to agriculture in Japan remains high compared to other countries and is provided by a comprehensive set of policies. While the government has continued to move toward income support, market price support is the main component and it, along with other transfers based on output and inputs, is potentially one of the most production and trade-distorting forms of support.

16. As one of the biggest consumers of fish and seafood in the world, Japan provides a range of support measures to fisheries. The budget support to the sector increased after the extensive damage caused by the 2011 tsunami with the aim of completing the recovery of fishing port facilities by end-FY2015. Although the average applied MFN tariff on fish and fish products was 6.2% in FY2014 (same as in FY2012), import quotas apply to several species of fish.

17. The shutdown of nuclear power plants following the accident in Fukushima in 2011 has provoked a major reconstruction programme. Although the electricity sector has been gradually reformed over the past twenty years, the regional utilities are still the main producers, transmitters, distributors, and retailers, while interchange between some of the regions remains limited. Recent amendments to the Electricity Business Act aim to secure a stable supply of electricity, suppressing electricity rates to the maximum extent possible, and expanding consumer choice and business opportunities.

18. In the financial services sector, the Financial Services Agency (FSA) of Japan has amended rules on large exposures in line with international standards, with effect from December 2014. Through supervisory guidelines and related measures, the FSA revised the minimum capital requirements for internationally active banks and intends to introduce other capital buffers and liquidity measures in accordance with Basel III. On telecommunications and transport sectors, Japan's legislation and policies have remained largely unchanged.

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19. Overall, despite a long period of relatively weak economic performance and some severe shocks to the economy over the past few years, Japan remains an open transparent economy – although support and protection in some areas, particularly agriculture, remain high. Japan has many unique characteristics, some of which have helped it become the third richest country in the world, but others add to the cost of importing, exporting, investing, and doing business. Addressing many of these impediments to growth is the target of the third arrow of the current reform programme and necessary if growth is to accelerate to a higher and sustainable level.

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1 ECONOMIC ENVIRONMENT

1.1 Recent Economic Developments

1.1. At the time of its 12th TPR in 2013, Japan was recovering from the earthquake and tsunami of 2011 which resulted in sharp declines in private consumption and stock-building, and widespread supply chain disruptions affecting production across the country, particularly in export-led sectors such as automobiles and electronics. Production had also been affected by the shutdown of nuclear power plants following the accident in Fukushima in 2011. Moreover, Japan confronted other key challenges, notably very high public debt, rapidly aging population, and nearly two decades of deflation and low growth.1

1.2. Since then, Japan has been implementing an ambitious reform programme to overcome deflation and revitalize the economy. The programme consists of a "three arrows strategy"2: monetary easing, flexible fiscal policy, and structural reforms (section 1.3).

1.3. Regarding monetary policy, on 22 January 2013 the government and the Bank of Japan (BOJ) released a joint-statement, where BOJ set a 2% price-stability target to be achieved at the earliest possible time.3 On 4 April 2013, BOJ introduced "Quantitative and Qualitative Monetary Easing" which included increasing the monetary base by some ¥60-70 trillion per year mainly through the purchase of Japanese government bonds.4 As a result, BOJ has now become the single biggest holder of Japanese government bonds (JGBs) underscoring the scale of its monetary easing programme.5 On 31 October 2014, BOJ announced it will expand the monetary base each year by some ¥80 trillion (from ¥60-70 trillion) in a further effort to achieve the 2% inflation target.6

1.4. On the fiscal side, the strategy has involved short-term economic stimulus combined with medium-term measures aimed at achieving fiscal consolidation. In early 2013, a fiscal package of ¥10.3 trillion (some US$100 billion or about 2% of GDP) was adopted.7 In December 2013, an extra fiscal stimulant of ¥5.5 trillion (US$53.4 billion or about 1% of GDP) was approved to mitigate the downside risks to the economy of the consumption tax rate increase from 5% to 8% applied as of 1 April 2014.8 This was the first increase in the consumption tax in 17 years and the first step in a two-stage boost that is set to take the tax rate to 10% in April 2017.9 The consumption tax, levied on goods and services transactions, is the largest component of indirect taxes, contributing 20.7% to total tax revenue in FY2013. The 8% consumption tax rate consists of the national consumption tax (6.3%) and a local consumption tax (1.7%).

1.5. Japan also aims to halve by FY2015 the primary deficit of central and local governments as compared to that of FY2010, and to achieve a primary surplus by FY2020. Thereafter Japan will seek to reduce the public debt-to-GDP ratio (estimated at about 240% of GDP in 2013). According to the IMF, the fiscal measures adopted by Japan are a welcome step but a concrete medium-term

1 WTO (2013). 2 The programme is commonly known as "Abenomics" because it is advocated by Prime Minister Shinzo Abe following the December 2012 general election. 3 Joint Statement of the government and the BOJ. Viewed at: http://www5.cao.go.jp/keizai1/2013/130122_joint_statement_of_the_government_and_the_bank_of_japan.pd f. The idea is to dispel the deflation mind-set entrenched among businesses and households. 4 BOJ online information. Viewed at: http://www.boj.or.jp/en/announcements/release2013/k130404a.pdf. 5 In March 2014, the BOJ had ¥201 trillion in JGBs, 20.1% of the total. IMF News Report, 18 June 2014. 6 BOJ Press Release, "Expansion of the Quantitative and Qualitative Monetary Easing", 31 October 2014. 7 On 11 January 2013, the government formulated its "Emergency Economic Measures for the Revitalization of the Japanese Economy". In order to implement the measures, a supplementary budget of FY2012 was passed through the Diet on 26 February 2013. The budget for FY2013 was passed on 15 May 2013. Viewed at: http://www5.cao.go.jp/keizai1/2013/130111_emergency_economic_measures.pdf . 8 Decision taken on 1 October 2013 based on the "Act for the Fundamental Reform of the Tax System". 9 Originally, the consumption tax rate was scheduled to increase to 10% in October 2015. However, this has been delayed until April 2017 in light of data suggesting that the increase in the sales tax rate from 5% to 8% affected Japan's real GDP growth rate more than expected.

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fiscal consolidation strategy beyond 2015 is needed otherwise the public debt-to-GDP ratio would again begin to rise after 2019.10

1.6. Regarding the exchange rate of the yen, a nominal depreciation against the U.S. dollar of about 22% took place in 2013 (Table 1.1), reflecting several factors such as the new monetary framework, a reversal of the yen's safe haven status, and a structural weakening of Japan's trade balance given higher energy imports (section 1.2.1). Between January-November 2014, the nominal exchange rate of the yen also depreciated against the U.S. dollar.11

Table 1.1 Selected macroeconomic indicators, 2009-13

2009 2010 2011 2012 2013 (% change, unless otherwise indicated) National accounts Real GDP -5.5 4.7 -0.5 1.5 1.5 Final domestic demand -4.0 2.9 0.4 2.3 1.8 Private consumption -0.7 2.8 0.3 2.0 2.0 Government consumption 2.3 1.9 1.2 1.7 2.0 Gross fixed capital formation -10.6 -0.2 1.4 3.4 2.6 Exports of goods and services -24.2 24.4 -0.4 -0.2 1.6 Imports of goods and services -15.7 11.1 5.9 5.3 3.4 Exports of goods and services (% of GDP)a 12.7 15.2 15.1 14.7 16.2 Imports of goods and services (% of GDP)a 12.3 14.0 16.0 16.7 19.1 Employment -1.5 -0.3 -0.1 -0.3 0.7 Unemployment rate (annual average) 5.1 5.0 4.6 4.3 4.0 Household disposable income (% change) -1.1 0.5 -0.1 -0.1 .. Prices and interest rates Consumer prices (CPI) (average; % change) -1.3 -0.7 -0.3 0.0 0.4 GDP deflator (% change) -0.5 -2.2 -1.9 -0.9 -0.6 Basic discount rate and basic loan rate (%) 0.3 0.3 0.3 0.3 0.3 Exchange rate (annual average, ¥ per US$) 93.5 87.8 79.8 79.8 97.6 (% of GDP) Fiscal balance Revenue 29.6 29.6 30.8 31.2 31.7 Expenditure 40.0 38.9 40.6 39.9 40.0 Balance -10.4 -9.3 -9.8 -8.7 -8.3 Primary balance -9.9 -8.6 -9.0 -7.8 -7.6 Excluding social security -9.3 -8.2 -9.0 -8.0 -7.6 Government debt, gross 210.2 216.0 2,229.8 237.3 243.4 Saving and investment National saving (gross) 22.2 22.3 22.4 21.9 .. Domestic investment (gross) 19.7 19.8 20.2 20.8 21.0 Current account 2.9 4.0 2.2 1.0 0.7 Goods 1.1 2.0 -0.1 -0.9 -1.8 Exports 10.9 13.3 13.4 13.1 14.2 Imports 9.7 11.4 13.4 14.0 16.0 Services -0.7 -0.6 -0.6 -0.9 -0.7 Primary income 2.7 2.8 3.1 3.0 3.4 Secondary income -0.2 -0.2 -0.2 -0.2 -0.2 Capital account -0.1 -0.1 0.0 0.0 -0.2 Financial account 3.4 4.6 2.8 1.0 -0.3 Direct investment 1.2 1.3 2.0 2.0 2.7 Portfolio investment 4.4 2.7 -2.7 0.7 -5.3 Financial derivatives (other than reserves) -0.2 -0.2 -0.3 0.1 1.2 Reserve assets 0.5 0.8 2.9 -0.6 0.8

.. Not available. a Percentage distribution in annual nominal GDP. Source: IMF (2014), Japan – 2014 Article IV Consultation – Staff Report, Country Report No. 14/236. Viewed at: https://www.imf.org/external/pubs/ft/scr/2014/cr14236.pdf; and information provided by the Japanese authorities.

10 IMF (2014a). 11 The authorities indicated that Japan's recent fiscal and monetary policy actions are intended to stop deflation and support domestic demand and do not target foreign exchange rates.

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1.7. In 2013, the Japanese economy grew by 1.5% (the same as in 2012) supported by strong industrial production, retail sales, and consumer spending. Expenditure on rebuilding the physical infrastructure also helped.12 For 2014 and 2015, the IMF expects Japan's real GDP growth to be 0.9% and 0.8%, respectively, as fiscal stimulus winds down.13 On 31 October 2014, BOJ halved its forecast for economic growth for FY2014 to 0.5%.14 The consumption tax increase had a negative effect on domestic demand which together with weak capital spending and big cuts in inventories caused the economy to shrink by 7.3% and 1.9% in the second and third quarters of 2014, respectively.

1.8. In 2013, Japan had an annual average inflation rate of 0.4% (zero in 2012) supported by BOJ's accommodative monetary policy stance. For 2014, the IMF expects an average inflation rate of 2.7%, i.e. somewhat above the 2% target, mainly as a result of the consumption tax increase. Nonetheless, underlying inflation (excluding the consumption tax increase) is expected to be 1.1% in 2014. For 2015, the IMF expects inflation of 2%.15 Following additional monetary easing, BOJ expects to meet its 2% inflation target in or around FY2015.16

1.9. Japan's current account surplus decreased during the review period from US$127.1 billion in 2011 to US$33.2 billion in 2013 (Table 1.2), reflecting a narrowing of the gap between gross national savings and gross domestic investment (Table 1.1). This decline is mainly the consequence of the trade deficits recorded since 2011, the longest period since comparable records began in the 1970s (section 1.2.1). For 2014 and 2015, respectively, the IMF expects current account surpluses of 1% and 1.1% of GDP.17

Table 1.2 Balance of payments, 2009-13 (US$ billion) 2009 2010 2011 2012 2013 Current account 145.4 217.9 127.1 58.7 33.2 Goods 57.6 108.6 -4.1 -53.6 -90.0 Exports 547.0 735.0 789.7 776.9 696.0 Imports 489.4 626.4 793.8 830.5 786.0 Services -34.9 -33.7 -38.2 -50.6 -35.7 Credit 121.0 131.3 137.6 134.2 135.4 Transport 31.6 39.0 38.4 40.2 39.6 Travel 10.3 13.2 11.0 14.6 15.2 Other 79.1 79.1 88.3 79.5 80.7 Debit 155.9 165.0 175.8 184.8 171.1 Transport 40.6 46.5 49.5 55.4 47.0 Travel 25.2 27.9 27.2 27.9 21.9 Other 90.2 90.6 99.1 101.5 102.3 Primary income 135.2 155.4 183.4 177.2 169.1 Secondary income -12.4 -12.5 -13.9 -14.4 -10.2 Capital account -5.0 -5.0 0.4 -1.0 -7.6 Credit 1.1 0.9 7.5 6.0 1.2 Debit 6.1 5.8 7.1 7.0 8.8 Financial account 173.2 254.1 165.9 61.6 -16.7 Direct investment 61.3 71.4 116.8 119.1 133.6 Portfolio investment 219.4 151.2 -162.1 40.4 -261.5 Financial derivatives -10.2 -11.7 -16.9 7.4 57.0 Other investment -124.4 -0.1 55.2 -67.0 14.6 Reserve assets 27.0 43.3 172.9 -38.3 39.5 Net errors and omissions 32.7 41.1 38.5 3.9 -42.3

Source: Information provided by the Japanese authorities.

12 Based on the estimation of reconstruction spending in the aftermath of the 2011 earthquake and tsunami, ¥25 trillion of fiscal resources have been allocated until March 2016. 13 IMF (2014b). 14 BOJ press release, "Outlook for Economic Activity and Prices", 31 October 2014. 15 IMF (2014b). 16 BOJ press release, "Outlook for Economic Activity and Prices", 31 October 2014. 17 IMF (2014b).

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1.2 Trade Performance and FDI

1.2.1 Trade in goods and services

1.10. During 2011-13, Japan's ratio of merchandise trade (exports and imports) to GDP averaged 28%. In 2013, the share of exports of goods and services in GDP was 16.9% (15.7% in 2011), while the share of imports was 19.5% (16.4% in 2011). These shares have increased since 2009, with imports rising faster (mainly due to higher fuel imports). Japan continues to be the world's fourth largest exporter and importer of goods (considering the countries of the European Union together and excluding intra-EU trade). In services trade, Japan ranked fifth and fourth among world exporters and importers, respectively.18

1.11. The appreciation in the exchange rate of the yen against major currencies up to 2012 eroded somewhat the international competitiveness of Japanese exports.19 In 2013, exports rose by 9.5% to ¥69.77 trillion, their first increase in three years, but in U.S. dollar terms that represented a decline of 10.5% (US$715.1 billion) given the significant depreciation of the yen against the U.S. dollar (Table 1.1). Imports reached their highest-ever level of ¥81.24 trillion (US$833.2 billion) in 2013. Consequently, Japan had its largest trade deficit (¥11.47 trillion or US$118.1 billion) in 2013.

1.12. Manufactures continue to dominate Japan's exports accounting for 87.6% of total merchandise exports in 2013, slightly down from 88.1% in 2011 (Chart 1.1). During 2011-13, machinery and transport equipment, led by automotive products, remained Japan's most important merchandise export, representing 57.9% of the total in 2013, followed by chemical products with a 10.6% share (Table A1.1).

1.13. Imports of fossil fuels have increased to fill an energy gap since the 2011 Fukushima crisis forced the shutdown of nuclear reactors that once supplied a third of Japan's power (section 4.3.2.1 and Table 4.19). Despite this, the share of primary products in total merchandise imports decreased from 51.4% in 2011 to 50.5% in 2013 mainly due to a reduction in agricultural imports during the period. On the other hand, the share of manufactures went up from 47.1% in 2011 to 48% in 2013, with machinery and transport equipment increasing from 20.8% of total imports in 2011 to 22.6% in 2013 (Table A1.2).

1.14. In 2013, the United States became Japan's largest export market, attracting 18.8% of total exports (up from 15.5% in 2011), followed by China with 18.1% (Chart 1.2). The share of Asia as a whole as an export destination also decreased slightly, but APEC's share increased to 78.4% (from 76.1%). The share of the European Union declined to 10% in 2013 from 11.7% in 2011, owing mainly to the global economic crisis (Table A1.3).

1.15. China's share in Japan's merchandise imports remained relatively stable at around 21-22% over 2011-13, and it remains Japan's largest trading partner. The share of goods imported by Japan from Asia decreased slightly to 50.9% in 2013, while the share of imports from the Middle East continued to rise mainly due to larger fuel imports. On the other hand, the share of imports from the United States decreased from 14.3% to 13.9% during 2011-13, and that of the European Union was stable at 9.4% (Table A1.4).

1.16. Balance of payments data indicate that Japan is a net importer of services with a deficit that averaged US$41.5 billion during 2011-13 (Table 1.2). Net outflows occurred in the form of payments for foreign travel and trade-related transport.

18 WTO Statistics Database, "Trade Profiles: Japan". Viewed at: http://stat.wto.org/CountryProfiles/JP_E.htm . 19 Japanese companies have also shifted a large part of their production to foreign countries.

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Chart 1.1 Product composition of merchandise trade, 2011 and 2013

2011 2013

(a) Exports (f.o.b.)

Other transport equipment 6.2% Other transport equipment Automotive products 5.3% Other consumer goods 18.3% 9.0% Automotive products Other consumer goods 21.2% 8.7% Other 6.0% Other 5.8% Other electrical Agriculture machines 1.3% Other electrical Agriculture 6.2% Mining machines 1.5% 4.6% 6.3% Mining 5.1% Manufactures Manufactures Iron & steel Office machines & 88.1% 87.6% telecommunication 5.7% Office machines & Iron & steel equipment telecommunication 5.4% 10.6% equipment Chemicals 9.8% 10.3% Chemicals 10.6% Non-electrical machinery Non-electrical machinery Other semi-manufactures 15.3% 17.1% 4.8% Other semi-manufactures 4.9%

Total: US$823.2 billion Total: US$715.1 billion

(b) Imports (f.o.b.)

Transport Transport Electrical machines equipment Electrical machines equipment 13.6% 3.0% 14.5% 3.9% Textiles & clothing Textiles & clothing 4.9% 5.1% Non-electrical machinery Non-electrical 4.2% Other consumer goods machinery 4.2% Other consumer Other semi-manuf. 7.6% goods 7.9% 4.9% Other semi-manuf. Manufactures Manufactures Other 4.5% Other 47.1% 48.0% 1.6% 1.4.% Chemicals Chemicals 8.8% Agriculture 7.9% Agriculture 11.2% 10.3%

Other mining Other mining 6.4% 8.0%

Fuels Fuels 33.8% 32.1%

Total: US$855.4 billion Total: US$833.2 billion

Source: UNSD, Comtrade database (SITC Rev.3).

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Chart 1.2 Direction of merchandise trade, 2011 and 2013

2011 2013

(a) Exports (f.o.b.)

Other 4.9% Other United States 4.4% 15.5% United States Other Asia Other Asia 18.8% 15.0% 15.1% Other America 6.2%

Thailand Thailand Other America 4.6% 5.0% 6.0% EU28 Hong Kong, Asia 11.7% Hong Kong, Asia China 5.2% 58.7% China 5.2% 57.2% EU28 10.0% Chinese Taipei Chinese Taipei 6.2% Middle East 5.8% 3.0% Middle East Korea, Rep. of Korea, Rep. of 3.6% 8.0% 7.9% China China 19.7% 18.1%

Total: US$823.2 billion Total: US$715.1 billion

(b) Imports (f.o.b.)

Other United States Other United States 5.6% 8.9% 6.4% 8.6% Other Asia Other America Other Asia Other America 11.5% 5.4% 11.7% 5.3%

EU28 Indonesia Indonesia EU28 9.4% 4.0% 3.5% 9.4%

Australia Australia Saudi Arabia, Saudi Arabia, 6.6% 6.1% Kingdom of Kingdom of Asia Asia 6.0% 51.8% 5.9% 50.9% Malaysia Malaysia 3.6% 3.6% United Arab United Arab Emirates 5.1% Emirates 5.0% Korea, Rep. of Korea, Rep. of 4.3% 4.7% Qatar 3.5% Qatar 4.4% Other Other Middle East China Middle East China 4.4% 21.7% 3.8% 21.5%

Total: US$855.4 billion Total: US$833.2 billion

Source: UNSD, Comtrade database.

1.2.2 Foreign direct investment

1.17. Until recently, the government did not consider attracting FDI a high priority, while the local business community in general considered investment by large foreign companies as a threat.

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Consequently, Japan's inward FDI is far below that of other major developed economies.20 The continued low level of FDI may also be attributed to factors such as the relatively high cost of doing business in Japan21; strict and complicated domestic sector regulations; limited availability of risk capital; regulatory barriers; the difficulty involved in hiring qualified employees; and impediments to mergers and acquisitions.

1.18. Japan aims to double the outstanding amount of FDI by foreign companies to ¥35 trillion by 2020. To achieve this, tax incentives to stimulate investment and private-demand-led growth are also being discussed. A cut in corporate tax (currently 30%) is considered as the initial major step (section 3.3.1.5).22

1.19. Japan is the second-largest outward direct investor in the world, with US$136 billion in 2013, up from US$56 billion in 2010 (Table 1.3), presumably due to low returns in the domestic economy. In particular, Japan has been strengthening its position as a major direct investor in some ASEAN countries where subsidiaries of Japanese companies often play a leading role in sectors such as autos and electronics.23

Table 1.3 Foreign direct investment, 2009-13 (US$ million) 2009 2010 2011 2012 2013 FDI inflows 11,938 -1,252 -1,758 1,732 2,304 FDI inward stock 200,144 214,880 225,787 205,361 170,929 FDI inward stock (% of GDP) 3.6 3.9 3.8 3.4 3.5 FDI outflows 74,699 56,263 107,599 122,549 135,749 FDI outward stock 740,927 831,076 962,790 1,054,928 992,901 FDI outward stock (% of GDP) 13.5 15.1 16.3 17.7 20.3

Source: UNCTAD (2014), World Investment Report 2014, Geneva.

1.20. The United States is now the largest investor in Japan, accounting for 58.9% of inward FDI in 2013, followed by the European Union. The largest recipient of FDI was the electric machinery industry, followed by glass and ceramics, and finance and insurance. FDI is highly concentrated in the metropolitan areas of Greater Tokyo and Kansai; elsewhere the presence of foreign-affiliated companies remains negligible.24

1.21. The United States, the European Union, and Thailand were the major recipients of outward foreign direct investment by Japan in 2013. The main industries/sectors invested in were finance and insurance, communications, mining, and wholesale and retail.

1.22. Since December 2011, Japan has been implementing the "Program for Promoting Japan as an Asian Business Centre and Direct Investment into Japan". Location subsidies, tax incentives, and reduced patent fees for R&D sites are being offered in the context of this programme. According to the authorities, from FY2010 to FY2014 the total subsidy under this programme amounted to ¥4 billion.

1.3 Outlook

1.23. Japan aims to achieve strong and sustainable growth in the future by encouraging private investment, increasing productivity, and enhancing competitiveness. Structural reforms are thus

20 Japan's annual inflows of FDI peaked in 2007-08, but were negative in 2010-11 meaning that the funds repatriated by foreign investors exceeded the new investments they made. In 2013, FDI inflows reached US$2.3 in 2013 (Table 1.3). By comparison, in 2013, the United States and China recorded inflows of US$188 billion and US$124 billion, respectively. UNCTAD (2014). 21 Japan ranks 27th out of 189 countries in the World Bank's Doing Business 2014 index (compared with 20th in 2012); it ranks 140th with regard to paying taxes, 120th with respect to starting a business, and 91st on dealing with construction permits. World Bank online information. Viewed at: http://doingbusiness.org/rankings. 22 The government has expanded tax incentives to encourage firms to raise wages. In December 2013, the government reached an agreement with representatives of employers and labour unions on the need to increase wages. As a result, many major firms have agreed to increase base wages and bonuses in 2014. 23 For example, Japan's implemented overseas direct investment into Indonesia reached US$2.5 billion in 2012. Oxford Analytical Daily Brief, 25 June 2014. 24 Oxford Analytical Daily Brief, 21 July 2014.

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- 18 - envisaged in areas such as agriculture, energy, and healthcare.25 Regarding the latter, Japan aims to expand: the market size of health care, disease prevention and other life-related industries from ¥4 trillion currently to ¥10 trillion in 2020; the market size of pharmaceutical products, medical equipment, regenerative medicine and other medical-care-related industries from ¥12 trillion to ¥16 trillion.

1.24. Some of the principles of the structural reforms being undertaken include: expanding the utilization of public-private partnerships and private finance initiatives (PPP/PFI) in infrastructure projects from ¥4.1 trillion to ¥12 trillion over the next ten years; and promoting corporate investment. The aim is to enhance the ratio of business start-ups to exceed the ratio of business closures from the current rate of around 5% to above 10%, and increase the return of capital investment from ¥63 trillion in FY2012 to ¥70 trillion per year. Moreover, Japan is taking steps to: increase its trade under RTAs to 70% by 2018 (up from 19% in 2013) (section 2.3.2); attract 30 million international tourists by 2030 (up from some 10.4 million people in 2013); and accelerate reconstruction in the northeast of the country in anticipation to the 2020 Olympics.

1.25. As part of the third arrow of structural reforms and in light of demographic challenges, on 24 June 2014 the government released its "Revised Japan Revitalization Strategy" aimed at becoming a world-class business centre by attracting global companies. The strategy includes increasing the use of foreign workers and enhancing workforce participation of women, youth and the elderly.26 To improve corporate productivity, the government is considering allowing a "white-collar exemption" to labour rules that require companies to pay extra for overtime. The plan also includes a corporate governance code for listed companies, and a revision of the portfolio of the US$1.26 trillion Government Pension Investment Fund (GPIF) was completed on 31 October 2014.

1.26. Another key demographic challenge facing the economy of Japan is to fund its social security system, mainly related to pensions and health care. Given present trends, Japan's population is expected to decrease from 127 million today to 87 million in 2060 when about 40% of the population will be 65 (currently the retirement age) or older. For this reason, a Japanese government advisory panel recently proposed a goal to ensure a population of 100 million by 2060 which is based, inter alia, on the assumption that the fertility rate in 2030 would be 2.07%.

1.27. The government also intends to press ahead with regulatory reforms, but so far the measures implemented deal with relatively minor issues such as the elimination of the limits on floor area ratios.27 Regulatory reforms will be pursued by utilizing the newly designated six National Strategic Special Zones (NSSZ): Tokyo and Kansai areas designated as "the international business and innovation hubs"; Niigata and Yabu cities, and Fukuoka city as "the reform centres for agriculture and employment system", respectively; and the Okinawa prefecture as the international tourism centre.

25 The government has set up an Industrial Competitiveness Council and a Regulatory Reform Council. On 14 June 2013, "Japan's Revitalization Strategy" was launched, which was followed by the "Agenda for the Evolution of the Growth Strategy" on 20 January 2014. The Industrial Competitiveness Enhancement Act was also enacted in January 2014. On 24 June 2014, "Japan's Revitalization Strategy" was revised. By June 2014, the Diet had passed 38 bills out of 40. 26 Improve female (25 to 44 years of age) participation in the workforce from the current rate of 68% to 73% by 2020; reduce by 20% the number of long-term unemployed (more than 6 months) over the next five years, as well as increase the rate of employment change and new hiring from 7.4% in 2011 to 9%; and double the number of international students by 2020. To spur more women to enter the workforce, the plan aims to establish after-school programmes for an additional 10,000 school-age children. It will also consider modifying tax and pension rules that currently favour stay-at-home wives over working women. 27 This special measure by relaxing the limits on floor area ratio for residential use in specific areas aims to facilitate the development of residences located close to global business districts.

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2 TRADE AND INVESTMENT REGIME

2.1 General Framework

2.1. Several government ministries are responsible for general trade policy in Japan including the Ministry of Foreign Affairs (MOFA), and the Ministry of Economy, Trade and Industry (METI), while several other ministries are responsible for specific issues or sectors such as: the Cabinet Office; the Ministry of Finance; the Ministry of Agriculture, Forestry and Fisheries; the Ministry of Education, Culture, Sports, Science and Technology; the Ministry of the Environment; and the Ministry of Land, Infrastructure, Transport and Tourism. In addition, several government agencies also have an input into certain aspects of trade policy such as the Bank of Japan, and the Japan External Trade Organization, while the Customs and Tariff Bureau is part of the Ministry of Finance.

2.2. In the Diet, there are several committees responsible for various aspects of trade including the committees on: Economy, Trade and Industry; Financial Affairs; Forestry and Fisheries; and Fundamental National Policies. Overall coordination of trade policies rests with the Cabinet and responsibility for trade-related legislation with the Cabinet and Diet. In planning and implementing a trade policy, the relevant ministry or government agency prepares a proposal and consults with other relevant governmental bodies. They submit their views and comments concerning the proposal. After obtaining approval from all the relevant ministries/agencies, the proposal becomes government policy. Regarding drafting of laws and governmental regulations, the relevant ministry or agency consults with all government bodies on the contents of a draft, and reflects their comments before the ministry in charge prepares a draft bill or regulation to be approved by the Cabinet and, where required, sent to the Diet for debate. There are many laws and regulations relating to trade with the principle laws in Table 2.1.

Table 2.1 Major trade-related laws and regulations, October 2014

Most recent Legislation amendment Foreign trade and exchange restrictions Foreign Exchange and Foreign Trade Act (1949 Law No. 228) 2009 Export and Import Transaction Act (1952 Law No. 299) 2013 Foreign Exchange Order (1980 Order No. 260) 2014 Export Trade Control Order (1949 Order No. 378) 2013 Import Trade Control Order (1949 Order No. 414) 2009 Customs- and tariff-related regulations Customs Law (1954 Law No. 61) 2013 Customs Tariff Law (1910 Law No. 54) 2014 Temporary Tariff Measures Law (1960 Law No. 36) 2014 Cabinet Order Relating to Countervailing Duties (1994 Order No. 415) 2009 Cabinet Order Relating to Anti-Dumping Duties (1994 Order No. 416) 2009 Cabinet Order Relating to Emergency Duties (1994 Order No. 417) 2009 Cabinet Order Relating to Retaliatory Duties (1994 Order No. 418) 2000 Cabinet Order on Tariff Quotas (1961 Order No. 153) 2014 Trade promotion Trade and Investment Insurance Act (1950 Law No. 67) 2014 Services and energy Construction Business Act (1949 Law No. 100) 2014 Banking Law (1981 Law No. 59) 2011 Insurance Business Law (1995 Law No. 105) 2011 Financial Instruments and Exchange Law (1948 Law No. 25) 2011 Telecommunications Business Act (1984 Law No. 86) 2014 Law Concerning the Measures by Large-Scale Retail Stores for Preservation of Living Environment 2000 (1998 Law No. 91) Employee's Pension Insurance Law (1954 Law No. 115) 2011 Civil Aeronautics Act (1952 Law No. 231) 2014 Marine Transportation Law (1949 Law No. 187) 2012 Act on Special Measures Concerning the Handling of Legal Services by Foreign Lawyers (1986 2014 Law No. 66) Certified Public Accountants Act (1948 Law No. 103) 2011 Certified Tax Accountant Law (1951 Law No. 237) 2007 Law for Improvement of International Tourist Hotels (1949 Law No. 279) 2011 Travel Agency Law (1952 Law No. 239) 2011

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Most recent Legislation amendment Electricity Utilities Industry Act (1964 Law No. 170) 2012 Gas Utility Industry Law (1954 Law No. 51) 2012 Petroleum Stockpiling Act (1975 Law No. 96) 2012 Act on the Quality Control of Gasoline and Other Fuels (1976 Law No. 88) 2008 Standards and technical regulations Industrial Standardization Act (1949 Law No. 185) 2013 Law Concerning Standardization and Proper Labelling of Agricultural and Forestry Products (JAS Law) 2013 (1950 Law No. 175) The Act on Securing Quality, Efficacy and Safety of Pharmaceuticals, Medical Devices, Regenerative 2013 and Cellular Therapy Products, Gene Therapy Products, and Cosmetics (1960 Law No. 145) Food Sanitation Law (1947 Law No. 233) 2014 Quarantine Law (1951 Law No. 201) 2008 Plant Protection Act (1950 Law No. 151) 2012 Act on Domestic Animal Infectious Diseases Control (1951 Law No. 166) 2013 Building Standard Law (1950 Law No. 201) 2011 Electrical Appliance and Material Safety Law (1961 Law No. 234) 2011 Consumer Product Safety Law (1973 Law No. 31) 2013 High Pressure Gas Safety Act (1951 Law No. 204) 2011 Road Vehicle Law (1951 Law No. 185) 2014 Act Concerning the Rational Use of Energy (1979 Law No. 49) 2011 Fire Service Law (1948 Law No.186) 2009 Intellectual property rights Patent Act (1959 Law No. 121) 2014 Customs Law (1954 Law No. 61) 2013 Act Against Unjustifiable Premiums and Misleading Representations (1962 Law No. 134) 2014 Unfair Competition Prevention Act (1993 Law No. 47) 2012 Utility Model Act (1959 Law No. 123) 2014 Design Act (1959 Law No. 125) 2014 Trademark Act (1959 Law No. 127) 2014 Copyright Law (1970 Law No. 48) 2014 Civil Code (1896 Law No. 89) 2013 Agriculture Basic Law on Food, Agriculture and Rural Areas (1999 Law No. 106) 2009 Temporary Law for Compensation Price for Producers of Milk for Manufacturing Use (1965 Law 2008 No. 112) Others Administrative Procedure Law (1993 Law No. 88) 2006 Act Concerning Prohibition of Private Monopolization and Maintenance of Fair Trade (Anti-Monopoly 2013 Act) (1947 Law No. 54)

Source: Information provided by the Japanese authorities.

2.3. In addition to the relevant ministries, several Incorporated administrative agencies (IAA) or other types of official agencies are responsible for, or involved in, trade-related activities, including:

• Japan External Trade Organization (JETRO), which is responsible for trade promotion while the Japan Bank for International Cooperation (JBIC) and the Nippon Export and Investment Insurance (NEXI) are the official export credits agencies of Japan;

• In addition to government ministries, the development and implementation of standards and SPS measures are the responsibility a number of agencies including; the Japanese Industrial Standards Committee; the Pharmaceuticals and Medical Devices Agency; the National Public Safety Commission; the Consumer Affairs Agency; and the Government Regulatory Unit;

• Japan Oil, Gas and Metals National Corporation provides technical and financial support for exploration and development of minerals both in Japan and abroad; and

• Japan National Tourism Organization which promotes tourism and tourism-related services in Japan.

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2.2 Trade Policy Objectives

2.4. Under the third arrow of Abenomics, on structural reform, there have been several significant developments in Japan's economic policy, including global economic integration which includes trade policy. The diminishing surplus on the current account and persistent trade deficits have increased emphasis on improving competitiveness through a favourable business environment, both within and outside Japan. Therefore, the focus of Japan's trade policy under Abenomics includes:

• extending its network of economic partnership agreements (see below);

• strategic approaches to emerging economies to support expansion by Japanese enterprises, export infrastructure and systems, and to secure supplies of resources; and

• promoting foreign direct investment into Japan (see below).1

2.3 Trade Agreements and Arrangements

2.3.1 WTO

2.5. Japan grants MFN or preferential treatment to a country or territory that meets one or more of the following criteria: it is a Member of the WTO; it is covered by a provision of the Cabinet Order under Article 5 of the Customs Tariff Law; or with whom Japan has a bilateral treaty of commerce and navigation. At present that includes all countries and territories except Andorra, Equatorial Guinea, the State of Eritrea, Lebanon, the Democratic People's Republic of Korea, South Sudan, and the Democratic Republic of Timor-Leste.

2.6. According to the authorities, maintaining and strengthening the multilateral trading system under the WTO has been a main pillar of Japan's external economic policy. As one of the major Members of the WTO, Japan is committed to supporting the system. At the same time, Japan is also promoting bilateral and regional negotiations on economic partnership agreements as a means of complementing the multilateral trading system.

2.7. Japan actively participates in the WTO in both regular work and in negotiations. In recent years it has focused on the Trade Facilitation Agreement and is a party to the plurilateral negotiations on expanding the Information Technology Agreement, trade in services, and Environmental Goods Agreement.

2.8. In dispute settlement, Japan has been a complainant in 19 cases, a respondent in 15, and a third party in 146 cases (Table A2.1). Japan has submitted numerous notifications under the different WTO agreements (Table A2.2).

2.3.2 Regional and preferential agreements

2.9. Current policy for negotiating Economic Partnership Agreements (EPAs) is based on the Japan Revitalization Strategy, decided by Cabinet in 2013 and, before that, the Basic Policy on Comprehensive Economic Partnerships of 2010. Under the Strategy, "the government will raise FTA ratio from current 19% to 70% by 2018, by promoting economic partnership as a basis of global economic activities". The FTA ratio is defined as the percentage of the volume of trade to which FTAs (signed or in force) are applied in total trade volume of Japan. The Strategy confirms that work on several EPAs will proceed concurrently (including the Trans-Pacific Partnership (TPP), the Regional Comprehensive Economic Partnership (RCEP), the Japan-China-Republic of Korea FTA, and the Japan-EU EPA).

2.10. As at November 2014, the network of 13 regional trade agreements or EPAs in force is the same as that reported in the last Trade Policy Review.2 Under these agreements, Japan has tended to exclude a variety of agricultural and related products – particularly certain tariff lines for meat

1 METI (2014b), p. 20. 2 WTO document WT/TPR/S/276/Rev.1 of 18 June 2013, Table AII.3.

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and meat products, fish and fish products, dairy products, rice, products of the milling industry, plywood, leather and products thereof, and footwear.

2.11. During the period under review, the Japan-Australia EPA (JAEPA) was signed (July 2014) and agreement in principle was reached on the Japan-Mongolia EPA in the same month.

2.12. In 2013 Japan began negotiations with China and the Republic of Korea on a China-Japan- Republic of Korea free trade agreement in March, with the European Union in April, started negotiations on the Regional Comprehensive Economic Partnership in May, entered the negotiations on the Trans-Pacific Partnership in July, and Japan and Turkey held a scoping meeting on a possible EPA in June. EPA/FTAs with Canada, Colombia, the Gulf Cooperation Council, and the Republic of Korea are under negotiation (Table 2.2).

Table 2.2 Trade agreements concluded by, not yet in force and under negotiation

Title Launched Status Note Australia April 2007 Signed, July 2014 Mongolia June 2012 Agreement in principle, July 2014 China-Japan-Republic of Korea March 2013 Under negotiation Regional Comprehensive May 2013 Under negotiation ASEAN (Brunei Darussalam, Cambodia, Indonesia, Economic Partnership Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, Viet Nam), Australia, China, India, Japan, Republic of Korea, and New Zealand Trans-Pacific Partnership July 2013 Under negotiation Australia, Brunei Darussalam, Canada, Chile, (Japan joined) Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States, and Viet Nam European Union April 2013 Under negotiation Canada November 2012 Under negotiation Colombia December 2012 Under negotiation Gulf Cooperation Council September 2006 Under negotiation Kingdom of Bahrain, State of Kuwait, Oman, Qatar, Kingdom of Saudi Arabia, United Arab Emirates Republic of Korea December 2003 Under negotiation

Source: Various.

2.3.3 Other agreements and arrangements

2.13. Japan provides preferential access under the Generalized System of Preferences to 144 countries or territories. Since the last review of Japan, Samoa was taken off the list in April 2014 because it was no longer classified as a least-developed country, and Croatia graduated from the list because it had been classified as a high-income economy in the previous three years' World Bank statistics.

2.14. Under the GSP scheme, preferential tariff rates apply to 409 tariff lines out of 2,320 (at the 9-digit level) in Chapters 1 to 24 (agriculture and fisheries) and 3,153 out of 7,029 in Chapters 25 to 97.3 The preferential margin varies from one product to another and the main exclusions are rice and rice products, meat and meat products, fish, dairy products, pineapples, cereal products, textiles and clothing, leather and leather products, and footwear.

2.15. Forty-seven of the countries and territories that receive GSP treatment are least-developed countries and qualify for more extensive product coverage under Japan's duty-free and quota-free treatment for LDCs. Currently, about 98% of tariff lines are covered.

2.16. Product coverage under the duty-free quota-free scheme for least developed countries and the GSP scheme is reviewed each year as part of the annual tariff revision. The GSP scheme itself is revised every ten years with the next revision due in 2021.

2.17. Japan has been a Member of APEC since its foundation in 1989 and a member of the Asia- Europe Meeting (ASEM).

3 Japanese authorities.

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2.4 Investment Regime

2.18. As noted in Chapter 1, Japan's inward FDI remains significantly lower than outward FDI and low compared with other developed economies (section 1.2.2). Japan is ranked 27th out of 189 economies in the World Bank's Doing Business report for 2014 and its ranking varies considerably from one heading to another: while Japan is ranked first for resolving insolvency; it is ranked 140th for paying taxes; and 120th for starting a business.4

2.19. According to the authorities the only provisions that affect FDI directly are in the Act for Promotion of Japan as an Asian Business Center of 2012 which provides incentives to encourage investment in establishing Research and Development and Regional Headquarters, primarily through tax breaks, including corporate and income tax breaks. However, many other laws affect investment, including the Foreign Exchange and Foreign Trade Act, the Order on Inward Foreign Direct Investment, and the Foreign Exchange Order.5

2.20. The Act on National Strategic Special Zones of 2013 allows for the designation of zones where regulatory reform is expected to lead to increased investment. According to the authorities, precise details for each zone are to be decided by consensus between the national government, local authorities, and the private sector.

2.21. In March 2014, six National Strategic Special Zones were identified with three objectives:

• the Tokyo zone and the Kansai zone for comprehensive regulatory reform with the aim of establishing them as bases for international business and innovation;

• the Niigata City zone, the Yabu City zone, and the Fukuoka City zone with the aim of regulatory reform for agriculture and employment; and

• the Okinawa Prefecture zone for tourism-focused business.6

2.22. Under the revised Japan Revitalization Strategy of 2014, the objective of strengthening the competitiveness of Japan and promoting investment requires "accelerating the TPP and other economic partnership negotiations to remove obstacles to the cross-border movement of goods, services and investment; fundamentally reforming energy policy to prevent energy costs, including electricity rates, from rising; carrying out a pro-growth corporate tax reform and "so on" and sets a target of doubling investment by foreign companies in Japan to ¥35 trillion by end-FY2020. These objectives are to be achieved through several initiatives including: regulatory reform to improve the business climate; support measures for investment; enhancing National Strategic Special Economic Zones; and improving the system for the resolution of labour disputes.7

2.23. The Council for Promotion of Foreign Direct Investment was established by the government in April 2014 following a recommendation by the Expert Group Meeting on Foreign Direct Investment in Japan. The Expert Group noted the low level of FDI in Japan and identified several contributory factors:

• an inflexible labour market and low participation by women in the labour force as well as language skills;

• corporate governance, particularly the low focus on improving shareholders' returns;

• relatively high energy and distribution costs, the costs of meeting Japan's quality and safety standards and, particularly for agricultural raw materials, high costs of inputs;

• high nominal and effective rates of corporation tax and costs of complying with the tax system as well as other administration costs such as setting up businesses.

4 World Bank (2013), p. 200. 5 WTO document WT/TPR/S/276/Rev.1 of 18 June 2013, section II(3). 6 Kantei (2014), p. 88. 7 Kantei (2014).

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2.24. The Expert Group made a number of recommendations including reducing the tax and administrative costs, improving human resources, harmonization and simplification of licensing and approval systems, and promotion of EPAs, tax agreements, and other bilateral investment-related treaties.8

2.25. The FY2014 Subsidy Program for Projects Promoting Foreign Direct Investment, Site Location and Regional Development in Japan (Project of site location for global companies) provides subsidies of up to ¥500 million for the costs of survey design, purchasing or leasing facilities and equipment for global companies establishing regional headquarters or research and development sites in Japan. Seven projects were selected in FY2014. Four projects were selected in each year under the equivalent FY2012 and 2013 programmes.9

2.26. Japan has bilateral investment treaties with 32 countries/territories, including ten bilateral trade agreements which include investment provisions (Table 2.3).

Table 2.3 Bilateral investment treaties in force (country and year they were signed) Investment treaties Egypt (1977) Mongolia (2001) Papua New Guinea (2011) Sri Lanka (1982) Korea, Republic of (2002) Iraq (2012) China (1988) Viet Nam (2003) Kuwait, the State of (2012) Turkey (1992) Cambodia (2007) Japan; China; and Korea, Republic of (2012) Hong Kong, China (1997) Lao People's Democratic Republic (2008) Mozambique (2013) Bangladesh (1998) Peru (2008) Myanmar (2013) Pakistan (1998) Uzbekistan (2008) Russia (1998) Colombia (2011) Regional trade agreements with investment provisions Singapore Mexico Indonesia Chile Thailand Switzerland Brunei Philippines India Malaysia

Source: Japanese authorities.

2.27. In addition, Japan has, or is a party to, 62 tax conventions applicable to 85 jurisdictions, including other signatories to the Convention on Mutual Administrative Assistance in Tax Matters (Table 2.4).

Table 2.4 Tax conventions

Avoidance Avoidance of double Convention on of double Convention on taxation mutual taxation mutual Country/ Country/ and administrative and administrative territory Territory prevention assistance in prevention assistance in

of fiscal exchange tax matters of fiscal exchange tax matters evasion evasion Tax information Tax information Tax information

Albania * Korea, Republic of * * Argentina * Kuwait, the State of * Armenia * Kyrgyz Republic * Australia * * Liechtenstein * Austria * Lithuania * Azerbaijan * * Luxembourg * * Bahamas * Macao, China * Bangladesh * Malaysia * Belarus * Malta * Belgium * * Mexico * * Belize *Moldova, Republic of * * Bermuda * Netherlands * * Brazil * New Zealand * * Brunei Darussalam * Norway * * Bulgaria * Oman * Canada * * Pakistan *

8 Cabinet Office (2014). 9 METI online information. Viewed at: http://www.meti.go.jp/english/policy/external_economy/investment/index_FDI_into_Japan.html [October 2014].

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Avoidance Avoidance of double Convention on of double Convention on taxation mutual taxation mutual Country/ Country/ and administrative and administrative territory Territory prevention assistance in prevention assistance in

of fiscal exchange tax matters of fiscal exchange tax matters evasion evasion Tax information Tax information Tax information

Cayman Islands * Philippines * China * Poland * * Colombia * Portugal * Costa Rica * Romania * Croatia * Russian Federation * Czech Republic * * Samoa * Denmark * * Saudi Arabia, Kingdom of * Egypt * Singapore * Fiji * Slovakia * * Finland * * Slovenia * France * * South Africa * * Georgia * * Spain * * Germany * Sri Lanka * Ghana * Sweden * * Greece * Switzerland * Guernsey * * Tajikistan * Hong Kong, China * Thailand * Hungary * Tunisia * Iceland * Turkey * India * * Turkmenistan * Indonesia * Ukraine * * Ireland * * United Kingdom * * Isle of Man * United States * * Israel * Uzbekistan * Italy * *Vietnam * Jersey * Zambia * Kazakhstan *

Source: MOF online information. Viewed at: http://www.mof.go.jp/english/tax_policy/tax_conventions/international_182.htm [October 2014].

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3 TRADE POLICIES AND PRACTICES BY MEASURE

3.1 Measures Directly Affecting Imports

3.1.1 Customs procedures and requirements

3.1. Since Japan's last review in 2013, there has been little change to customs clearance procedures and requirements. Japan Customs, under the Ministry of Finance, continues to administer and enforce customs legislation. There are no special registration requirements for importers and the use of a customs broker is optional.1 A customs import declaration is needed for importation, in addition to other documents which may be required through risk management, such as bill of lading, commercial invoice, and packing list. Electronic application formalities between various agencies have been unified through the completion of the common portal for the next generation single window. Currently seven customs offices are permanently open.

3.2. Japan Customs introduced the Authorized Economic Operator (AEO) programme in March 2006 and subsequently developed it to simplify customs procedures and facilitate legitimate trade.2 Importers, exporters, manufacturers, warehouse operators, customs brokers, and logistics operators are eligible to become AEOs in Japan. Importers with cargo security management and a good compliance record may file import and customs duty declarations separately; this allows goods to be released before filing the customs duty declaration; import declarations may be filed in advance of cargo arrivals.

3.3. As at 1 April 2014, the total number of AEOs was 523 (compared with 501 on 1 April 2013). Following progressive improvements in Japan's AEO scheme, the release time for AEO import cargoes has been reduced significantly. According to the latest time-release study conducted in March 2012 on maritime cargoes, the release time was 0.1 hours (6 minutes) for AEO import cargoes as against 2.6 hours (156 minutes) for non-AEO import cargoes. On air cargoes, less than one minute was needed for AEO import cargoes compared to 0.3 hours (18 minutes) for non-AEO import cargoes.3

3.4. Japan has mutual recognition arrangements (MRAs) on AEO programmes with Canada, the European Union, the Republic of Korea, Malaysia, New Zealand, Singapore, and the United States. Under these MRAs, Japan Customs takes into account the status of the members of the other AEO programme when conducting its own risk assessment. Japan is in consultation with Switzerland on the possibility of having MRAs on AEOs.

3.5. Japan ranks 20th (out of 189 economies) in the World Bank's Trading Across-Borders 2015 Index; import procedures take 11 days and cost US$1,107 per container (compared with 11 days and US$970 per container in 2013).4 The Japanese authorities indicate that this data refers to import procedures other than customs. Customs fees and charges are described in the website of Japan Customs.5

3.1.2 Customs valuation

3.6. During the review period, Japan amended some provisions concerning the determination of customs value of imported goods in customs-related laws and regulations with the aim of improving their clarity particularly for complicated transactions (e.g. conditions of buyer and buying commission have been simplified).

1 According to Article 3 of the Law of Customs Brokerage, to operate as a customs broker an approval is required from the Director of Customs. 2 In 2005, the World Customs Organization adopted the SAFE Framework of Standards which includes the Authorized Economic Operator (AEO) programme. AEOs must prove to have high quality internal processes that will prevent goods in international transport being tampered with. This facilitates trade for low-risk operators and ensures Customs can focus inspection resources on more high-risk parties. 3 Japan Customs (2012). 4 World Bank Group online information. Viewed at: http://doingbusiness.org/data/exploreeconomies/Japan. 5 Japan Customs online information. Viewed at: http://www.customs.go.jp/english/exp- imp/customsfee.htm.

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3.7. All importers must file a customs declaration basically after goods have entered into bonded (hozei) area; this may now be done without entry of goods into the bonded area under certain conditions, such as an authorized importer presenting an import declaration with the Electronic Data Processing System. The customs value of imported goods is determined according to their c.i.f. price (in principle based on the transaction value of the imported goods).

3.8. Importers may pay the assessed customs duty through the multi-payment network system. The network connects teller institutions (government authorities) with financial institutions. The government does not charge any fee for the use of the system; however, the financial institutions involved may collect fees. An advance ruling, which is issued in writing by Customs upon written request of an applicant, is binding on such Customs in respect of the applicant that sought it. An applicant includes not only importers but also other relevant parties. Information in writing on advance rulings are made available through the internet on the website of Japan Customs.6

3.9. Complaints against Customs' decisions may be made to the Director-General of Customs within two months of the decision. Further appeals may be lodged with the Minister of Finance within one month of the decision by the Director-General of Customs. A lawsuit may be filed against the Minister's decision within six months of such decision. According to the authorities, in 2013 there were 43 complaints (as in 2012), 18 appeals (as compared to 8 in 2012), and 5 law suits were filed (compared to 3 in 2012).

3.1.3 Rules of origin

3.10. Japan has notified the WTO that it has non-preferential rules of origin.7

3.11. Japan provides preferential rules of origin under the Generalized System of Preferences (GSP) and its various RTAs/EPAs (section 2). To benefit from preferential duties, certificates of origin need to be provided, issued by authorized institutions in the exporting country8, in order to prove that the product being imported is basically "wholly obtained" or "substantially transformed" (e.g. change of tariff classification at the HS 4-digit or 40% of value added) in the exporting country. For goods "not wholly obtained", specific criteria based on change of tariff classification rules, processing rules, and value added rules are applied on a product-by-product basis. Rules of origin under EPAs and the GSP apply these specific criteria for various products.

3.12. Japan's MFN rules of origin to determine, inter alia, whether to apply MFN rates (as opposed to general rates) are detailed in Article 4-2 of the Cabinet Order for Enforcement of the Customs Law, and Articles 1-5 and 1-6 of the Ordinance for Enforcement of the Customs Law.9 MFN tariff rates are applicable to imports from eligible countries, where the country of origin is defined as the country in which the goods concerned have been wholly obtained or have undergone substantial transformation (change of tariff classification at the HS 4-digit level).

3.1.4 Tariffs

3.1.4.1 MFN applied tariff

3.13. Goods imported into Japan may be subject to customs tariffs, consumption tax (VAT), and excise duties on products such as liquor, tobacco, gasoline, LPG, and automobiles (section 3.3.1).

3.14. The structure of Japan's MFN applied tariff has remained largely unchanged over the last few years. In FY2014, Japan's tariff schedule comprised 9,151 lines (down from 9,168 in FY2012) at the HS nine-digit level (Table 3.1).10 Of all tariff lines, 93.3% involve ad valorem rates

6 See http://www.customs.go.jp/english/. 7 WTO documents G/RO/N/1, 9 May 1995 and G/RO/N/1/Add.1, 22 June 1995. 8 In EPAs with Mexico, Peru, and Switzerland certificates may also be issued by approved exporters. 9 The MFN rules of origin are also used to determine the country of origin for some trade remedy measures and import trade statistics. 10 Excluding in-quota lines (in-quota lines subject to state trading are included in the calculations). The Japanese tariff schedule has three distinct sets of rates: statutory rates (include both general and temporary rates); WTO bound rates; and preferential rates (under the GSP, and RTAs/EPAs with Brunei Darussalam, Chile, India, Indonesia, Malaysia, Mexico, Peru, Philippines, Singapore, Switzerland, Thailand and Viet Nam). In the case of statutory rates, the "temporary" rate, which is reviewed annually, is normally used instead of the

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(including duty free lines which are 40.4% of all lines). The remaining 6.7% (i.e. 613 lines) are non-ad valorem: specific rates are applied to 2.6% of the lines; 3.1% have alternate specific duty or ad valorem; 0.6% have compound rates; and other types of tariff (differential duties and sliding duties) apply to 0.3% of tariff lines (Chart 3.1).11

Table 3.1 Structure of MFN tariffs, FY2010, FY2012 and FY2014 (%, unless otherwise indicated) MFN applied Final FY2010 FY2012 FY2014 bounda Bound tariff lines (% of all tariff lines) 98.8 98.3 98.3 98.3 Simple average rate 5.8 6.3 5.8 5.9 WTO agricultural products 15.7 17.5 14.9 15.2 WTO non-agricultural products 3.5 3.7 3.7 3.7 Duty free tariff lines (% of all tariff lines) 41.4 40.5 40.4 38.7 Simple average rate of dutiable lines only 10.0 10.7 9.9 9.8 Domestic tariff "peaks" (% of all tariff lines)b 6.6 6.6 6.6 6.7 International tariff "peaks" (% of all tariff lines)c 7.4 7.6 7.4 7.5 Overall standard deviation of tariff rates 16.0 20.5 14.3 14.5 Coefficient of variation of tariff rates 2.7 3.2 2.4 2.4 Tariff quotas (% of all tariff lines) 1.8 1.8 1.8 1.8 Non-ad valorem tariffs (% of all tariff lines) 6.6 6.7 6.7 6.3 Non-ad valorem tariffs with no AVEs (% of all tariff lines) 2.0 1.5 1.8 1.5 Nuisance applied rates (% of all tariff lines)d 1.3 1.5 1.5 1.4 Number of lines 8,826 9,168 9,151 8,992 Ad valorem rates 4,590 4,839 4,840 4,875 Duty free lines 3,652 3,714 3,698 3,542 Non-ad valorem rates 584 615 613 734 Specific 207 236 236 228 Compound 56 57 57 58 Alternate 289 290 288 289 Other 32 32 32 0

a Final bound rates are based on the FY2014 tariff schedule in HS12 nomenclature. Calculations are based on bound rates only. b Domestic tariff peaks are defined as those exceeding three times the overall simple average applied rate. c International tariff peaks are defined as those exceeding 15%. d Nuisance rates are those greater than zero, but less than or equal to 2%. Note: All tariff calculations exclude in-quota lines and include AVEs, as available, provided by the Japanese authorities. In case of unavailability, the ad valorem part is used for compound and alternate rates. FY2010 tariff schedule is based on HS07 nomenclature and FY2012 and FY2014 are based on HS12. Source: WTO calculations, based on data from Japan Customs. Viewed at: http://www.customs.go.jp/english/tariff/2014_4/index.htm.

3.15. The non-ad valorem rates apply mainly to fats and oils, followed by footwear, prepared foods, mineral products, vegetables, live animals and animal products, and textiles and clothing (Chart 3.2).

higher general rate; the lower of the statutory and WTO bound rates are applied to WTO Members on an MFN basis, except when preferential rates are applied. Where the temporary, general, or preferential rate is above the WTO bound rate, the latter rate applies to WTO Members. 11 An alternate duty involves either an ad valorem or specific rate; usually the higher of the two is applied (except in the case of HS2204.21-2 and HS2204.29-1). A compound duty involves a combination of ad valorem and specific rates. A differential duty involves a specific rate charged per kg of imports with the rate varying directly with the difference between the standard import price, set by the authorities, and actual import price. A sliding duty involves a specific tariff rate for imports valued up to a certain threshold; the rate declines as the value exceeds the threshold and becomes zero at a certain point.

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Chart 3.1 Tariff distribution by type of duty, FY2014

Ad valorem duty 52.9%

Specific duty 2.6%

Non-ad valorem duty Compound duty 0.6% 6.7%

Alternate duty 3.1%

Other 0.3%

Duty free 40.4%

Source: WTO Secretariat calculations, based on data from Japan Customs. Viewed at: http://www.customs.go.jp/english/tariff/2014_4/index.htm.

Chart 3.2 Share of non-ad valorem duties, by HS section, FY2014

45% (37) 40%

35%

30%

25% (25)

20% (126) 15% (35) (77) (66) (213) 10% (613)

5% (28) (2) (4) (0) (0) (0) (0) (0) (0) (0) (0) (0) (0) (0) 0% Total Footwear Machinery Fats and oils and Fats Mineral prod. Hides & skins & Hides Wood & articles & Wood Plastic & rubber Articles of stone Pulp, paper, etc. Works of art, etc. art, of Works Textiles & & articles Textiles Chemicals & prod. & Chemicals Prepared food, etc. Vegetable products Misc. manufactures Arms & ammunition Base metals & prod. & metals Base Live animals & prod. Precious stones, etc. stones, Precious Transport equipment Precision instruments

Note: Each bar depicts the percentage of tariff lines within each HS section that carry non-ad valorem duties; the figures in parentheses show the corresponding number of lines. In-quota rates are not included (lines subject to state trading are included). Source: WTO Secretariat estimates, based on based on data from Japan Customs. Viewed at: http://www.customs.go.jp/english/tariff/2014_4/index.htm.

3.16. In FY2014, Japan's overall simple average applied MFN tariff rate was 5.8% (down from 6.3% in FY2012) (Table A3.1). This reduction is due to lower average ad valorem equivalents (AVEs) of non-ad valorem duties. The authorities provided for 450 out of 613 AVEs based on

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- 30 - import data for 2012.12 Consequently, the tariff analysis is based on 98.8% of the 9,151 tariff lines. The simple average rate for all the AVEs supplied is 29.7%13; however, the highest rate is 298.6%, for certain semi-milled or wholly milled rice. Of the 104 highest tariffs, 96 had non-ad valorem rates.

3.17. Import duties on agricultural products are higher than duties on non-agricultural products: the simple average for agriculture (WTO definition) is 14.9% (17.5% in FY2012), compared with 3.7% for non-agricultural products (same as in FY2012). Simple average applied MFN tariffs are also relatively high for footwear and headgear, prepared foods, vegetables, live animals, hides and skins, arms and ammunition, and textiles and clothing (Chart 3.3).

Chart 3.3 Simple average applied MFN tariff rates, by HS section, FY2012 and FY2014

35%

FY2012 30% FY2014

25%

20%

15%

10%

5%

0% Total Machinery Fats and oilsFats and Mineral prod. Mineral Hides & skins Wood & articles & Wood Plastic & rubber Articles of stone Pulp, paper,etc. Works of art, etc. art, of Works Textiles & Textiles articles Chemicals & prod. & Chemicals Prepared food, etc. Vegetable products Misc. manufactures Arms & ammunition Footwear, headgear Base metals & prod. & metals Base Live animals & & prod. animals Live Precious stones, etc. stones, Precious Transport equipment Transport Precision instruments

Note: Excluding in-quota rates (lines subject to state trading are included). Including ad valorem equivalents (AVEs) provided by the Japanese authorities, as available. The ad valorem part of compound and alternate rates are used where AVEs are not available. Source: WTO Secretariat calculations, based on data from Japan Customs. Viewed at: http://www.customs.go.jp/english/tariff/2014_4/index.htm.

3.18. There are 161 tariff lines (1.8%) subject to MFN tariff quotas: 150 out-of-quota tariffs and 11 out-of-quota tariffs of state trading (in-quota lines are excluded). The out-of-quota rates for 38 tariff lines are ad valorem. The average rates differ considerably: in-quota rates average 18.1%, while out-of-quota rates average 67.1%. The quota allocation method and process remains somewhat intricate (section 4.1).14

12 For 29 out of 288 alternate rates no AVE was provided (the ad valorem part was used in the tariff analysis). For 25 out of 57 compound rates no AVE was provided (the ad valorem part was used). For 89 out of 236 specific rates and 20 out of 32 "other duties" rates no AVE was provided. 13 In comparison, the simple average of the AVEs at the time of Japan's last review was 37.7%, which was based on 2010 imports. 14 For details of the quota allocation method, see WTO (2001).

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3.1.4.2 Bound tariff

3.19. Japan has bound 98.3% of lines (159 lines are unbound) (Table 3.1); unbound lines relate mainly to fisheries (fish, crustaceans, seaweed), petroleum oils, and wood and articles thereof. Ad valorem rates account for 8,417 bound lines (93.6%), of which 3,542 lines are duty free. The difference between the average bound MFN tariff (5.9%) and the average applied MFN tariff (5.8%) in FY2014 was negligible, which reflects a high degree of predictability in the tariff.15 Japan has not used this gap to raise tariffs during the last few years. However, the average bound rate (WTO definition) is considerably higher for agricultural products (15.2%) than for non-agricultural products (3.7%).

3.1.4.3 Preferential tariff

3.20. Japan offers preferential tariff rates to 138 developing countries and 7 territories under the GSP; least developed countries (48 in 2014) receive additional preferences. China remains the largest beneficiary of preferential access to the Japanese market; it accounts for over three quarters of all preferential imports under the GSP scheme.16 Japan also grants preferential access under its RTAs/EPAs for imports from ASEAN, Chile, Brunei Darussalam, India, Indonesia, Malaysia, Mexico, Peru, Philippines, Singapore, Switzerland, Thailand, and Viet Nam (section 2.3.2).

3.21. Simple average tariff rates under all preferential arrangements (GSP, LDC, and EPAs) are lower than the simple average applied MFN rates. However, the rates vary widely from one product group to another. The overall simple average preferential rates range from 0.5% to 4.8%, while agriculture is subject to rates from 1.5% to 13.9% (Table 3.2). Tariffs under these arrangements are also high for certain processed and industrial goods, such as leather, rubber, footwear and travel goods, and textiles and clothing imports (under GSP); items such as dairy products, some footwear, and textiles and clothing are not included in the GSP scheme for developing countries and are therefore subject to applied MFN rates of duty.

Table 3.2 Summary analysis of Japan's preferential tariffs, FY2014

Number of Total WTO agriculture WTO non-agriculture preferential Average Duty-free Average Duty-free Average Duty-free linesa (%) rates (%) (%) rates (%) (%) rates (%) MFN 5.8 40.4 14.9 25.9 3.7 44.0 GSP 2,987 4.8 58.1 13.9 34.6 2.6 63.9 LDC 5,264 0.5 97.9 1.5 96.7 0.2 98.2 Economic Partnership Agreements Singapore 4,225 3.1 83.4 11.9 49.1 1.1 91.9 Mexico 4,149 3.1 84.9 13.0 40.4 0.8 95.9 Malaysia 4,419 2.6 84.7 11.5 49.5 0.5 93.4 Chile 4,317 2.8 83.1 12.1 49.0 0.6 91.5 Thailand 4,487 2.6 85.1 11.6 49.6 0.5 93.8 Indonesia 4,333 2.8 81.4 12.3 43.4 0.6 90.7 Brunei Darussalam 4,162 3.3 80.9 12.5 42.0 1.1 90.4 ASEAN 4,500 2.8 80.9 12.3 41.5 0.6 90.6 Philippines 4,574 2.6 83.1 11.5 46.2 0.5 92.2 Switzerland 4,339 3.0 80.5 12.5 41.8 0.7 90.0 Viet Nam 4,468 2.8 82.0 12.4 42.6 0.6 91.7 India 4,314 3.2 78.8 13.0 40.6 0.8 88.3 Peru 4,479 3.0 80.4 12.8 41.6 0.6 89.9

15 Whereas bound and applied MFN rates coincide for most lines, bound rates exceed applied MFN rates for, inter alia, live animals and animal products (HS Section 1); vegetables (Section 2); prepared foods, beverages, and tobacco (Section 4); chemicals and products (Section 6); plastics and rubber (Section 7); textiles and clothing (Section 11); and base metals (Section 15). The gap between bound and applied rates ranges from 0.3 percentage points to 40 percentage points. 16 Other major beneficiaries of Japan's GSP scheme include: Myanmar (4.1% of total imports under preferential treatment), Bangladesh (3.9%), and South Africa (3.5%).

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Number of Total WTO agriculture WTO non-agriculture preferential Average Duty-free Average Duty-free Average Duty-free linesa (%) rates (%) (%) rates (%) (%) rates (%) Memorandumb Singapore 4,519 2.7 83.9 11.8 49.3 0.6 92.5 Malaysia 4,523 2.6 85.2 11.5 49.5 0.5 94.0 Thailand 4,567 2.6 85.1 11.5 49.6 0.5 93.8 Indonesia 4,510 2.7 82.3 12.0 43.4 0.5 91.9 Brunei Darussalam 4,506 2.8 81.5 12.1 42.0 0.6 91.2 Philippines 4,639 2.6 83.7 11.5 46.2 0.5 92.9 Viet Nam 4,568 2.7 82.1 12.0 42.6 0.5 91.9 a The number of preferential lines includes only lines on which the rates are lower than the corresponding MFN applied rate. The 2014 MFN tariff consists of 9,151 tariff lines out of which 3,698 lines bear a duty-free rate. b Based on lowest rate applied from country's EPA and the ASEAN EPA. Source: WTO Secretariat calculations, based on data from Japan Customs. Viewed at: http://www.customs.go.jp/english/tariff/2014_4/index.htm.

3.1.5 Import prohibitions, restrictions, licensing, and quotas

3.22. Imports of certain goods are prohibited under Article 69-11 of Japan's Customs Law. For reasons of national security, safeguarding consumer health and well-being, preserving domestic plant and animal life and the environment, imports of narcotics, certain weapons, and animals or plants listed in the appendices of the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES), may be prohibited or subject to import licensing. Japan's Foreign Exchange and Foreign Trade Law governs import licensing procedures.17 In addition, some commodities, including certain fish, are subject to import quotas.

3.23. Items requiring import approval include weapons and other items from the Libyan Arab Jamahiriya as per United Nations Security Council Resolution. At present, products that require import approval or are prohibited include: certain marine products, chemical products, propellant powders, nuclear goods, weapons, animals and plants, substances that deplete the ozone layer, specified hazardous wastes, waste chemical weapons goods, alcohol, rough diamonds, cultural property illegally removed from Iraq, all goods from the Democratic People's Republic of Korea, weapons and other items related to nuclear programmes or ballistic missile programmes from Iran, and weapons and other items from the State of Eritrea. Licences to import are issued free of cost.

3.24. Japan uses quantitative restrictions on imports (import quotas); according to the authorities, the quotas adhere to the WTO Agreements. Products subject to import quotas (unchanged since 2007) include: certain fish products and controlled substances listed in the Montreal Protocol on Substances that Deplete the Ozone Layer.

3.25. The METI is responsible for administering the import quota system. Eligible importers are issued with an import quota allocation certificate normally valid for four or six months. The method for allocating quotas, specified in METI notices, has not changed since 2007 and remains somewhat complex. Quota allocations are decided on an annual basis. Fish-related quotas are allocated based on domestic supply and demand, e.g. the amount of imports, domestic production, consumption, and prices in the previous year, as well as projections for the coming year. These quotas are issued by the METI with the consent of the Ministry of Agriculture, Forestry and Fisheries (MAFF). Applicants for quota allocations must meet various criteria. Some quotas are allocated on a first-come first-served basis. When the amount applied for exceeds remaining unallocated quota, quotas are allocated by lottery.

3.26. Unused quota entitlements are non-transferable and cannot be carried over to the next period. Additionally, the government does not reallocate any unused quotas.

3.27. Japan has in place a system of prior confirmation to collect data on certain imports. The system is intended to ensure that these imports are for specific uses, and to verify documentation and origin requirements. Prior confirmation is required from the Minister of Economy, Trade and Industry, or other relevant minister. The system is used, inter alia, for goods where fraudulent

17 This is described in Chart III.3 in WTO (2013).

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- 33 - declarations have been found in the past or are deemed of high risk. These include: vaccine of microbial origin for experimental use; specified foreign cultural property; tuna; marlin; whales; poppy and hemp seeds; certain substances listed in the Montreal Protocol; radioisotopes; diamonds; and various other chemicals.

3.1.6 Contingency trade measures

3.28. Japan has only one anti-dumping duty in force: 14%-46.5% on electrolytic manganese dioxide originating from China, South Africa, and Spain. The period of validity for such anti-dumping duties was extended by five years and will expire on 5 March 2019 (it has been in force since September 2008). On 14 February 2014, Japan initiated an anti-dumping investigation into toluenediisocyanate from China.

3.29. Japan's legislative and institutional framework regarding contingency trade measures remain unchanged since its previous review. The Customs Tariff Law and the relevant Cabinet Orders and Guidelines define Japan's legal framework regarding the use of anti-dumping, countervailing, and safeguard measures.

3.30. Contingency trade remedies investigations are carried out by teams established on a case- by-case basis and composed of relevant officials from the Ministry of Finance, METI and the Ministry in charge of the relevant industry.18 The Ministry of Finance is involved in an investigation as the agency responsible for tariff policy and customs administration (Article 40 of the Cabinet Order for Organization of the Ministry of Finance), and the METI carries out an investigation as the agency responsible for increase, improvement and adjustment of import and export (Article 6(2) of the Cabinet Order for Organization of METI).

3.31. Japan did applied neither countervailing nor safeguard measures during the review period.

3.1.7 Standards and other technical requirements

3.32. The legal framework on standards and technical regulations in Japan has remained largely unchanged since its last review. The main laws for implementing the TBT Agreement in Japan, together with the agency responsible, are described in Table 3.3.

3.33. Other laws related to standards and technical requirements include (Ministries in charge in parentheses): Road Vehicles Act of 1951, last amended in 2014 (MLITT); Act on the Rational Use of Energy of 1979, last amended in 2008, applies to motor vehicles and other products designated by Ministerial Order (MLIT)19; Act Concerning the Safety Assurance and Quality Improvement of Feed of 1953, last amended in 2007, applies to animal feeds (MAFF); Act on the Evaluation of Chemical Substances and Regulation of their Manufacture of 1973, last amended in 2014 (MHLW); Industrial Safety and Health Act of 1972, last amended in 2014 (MHLW); Telecommunications Business Act of 1984, last amended in 2014 (Ministry of Internal Affairs and Communications, (MIC)); Radio Act of 1950, last amended in 2014, includes provisions relating to technical regulations, conformity assessment, and certification of radio equipment (MIC); Fertilizer Control Act of 1950, last amended in 2014 (MAFF).

3.34. For WTO matters, the TBT notification authority is the Ministry of Foreign Affairs and the TBT enquiry points are: (i) the Standards Information Service in MOFA which handles enquiries in the fields of drugs, cosmetics, medical devices, foodstuffs, food additives, telecommunication facilities, motor vehicles, ships, aircraft and railway equipment (excluding enquiries concerning JIS which are handled by JETRO); and (ii) the Standards Information Service in JETRO which mainly handles enquiries in the fields of electric equipment, gas appliances, measurement scales, foodstuffs, food additives, etc. Those enquiries concerning JIS on medical devices, motor vehicles, ships, aircraft and railway equipment are handled by JETRO.20

18 Articles 8(5) of the Customs Tariff Law and 6(4) of the AD Guideline; Articles 7(6) of the Customs Tariff Law and 5(4) of the CVD Guideline; and Articles 9(6) of the Customs Tariff Law, and 6(2) of the SG Guideline. 19 Enforcement Ordinance for the Act on the Rational Use of Energy of 1979, and Enforcement Regulations for the Act on the Rational Use of Energy of 1979. 20 WTO document G/TBT/2/Add.10, 11 June 1996.

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Table 3.3 Main laws on standards and technical regulations

First Last Legislation/Agency Purpose passed amended Industrial Standardization 1949 2013 Applies to all products except medicines, agriculture Act and fertilizer chemicals, silk yarn, foodstuffs, agricultural and forestry products. METI The Law establishes the Japanese Industrial Standards (JIS) Committee and the JIS Mark Scheme and provides the legal basis for standards, certification, accreditation of certification bodies and laboratories. Consumer Product Safety 1973 2011 Sets out requirements for: (1) a narrow range of Act specified products which must comply with technical requirements; and (2) specified maintenance products METI (some types of domestic water heaters and electric appliances) which must be provided with information on maintenance. It also provides the legal basis for reporting product accident information for consumer products. The Act on Securing 1960 2013 Regulating the manufacture, import, and sale of Quality, Efficacy and Safety pharmaceuticals, and medical devices, regenerative and of Pharmaceuticals, Medical cellular therapy products, gene therapy products, and Devices, Regenerative and cosmetics. Cellular Therapy Products, Gene Therapy Products, and Cosmetics

Ministry of Health, Labour and Welfare (MHLW) Act on Standardization and 1950 2013 Applies to foods, drinks, oils, and fats as well as other Proper Labelling of agricultural, forestry, livestock and fishery products and Agricultural and Forestry products made from them except liquors, drugs, and Products cosmetics. The Law provides the legal basis for the Japanese MAFF and Consumer Affairs Agricultural Standards (JAS) and criteria for adopting Agency standards, quality grading, labelling, registration of certifying bodies, etc. Building Standard Law 1950 2014 Applies to construction of buildings and buildings. The Law provides for the establishment of standards for Ministry of Land, construction of buildings, including fireproofing and Infrastructure, Transport procedures for inspection and certification of buildings, and Tourism (MLIT) and type approval. Electrical Appliance and 1961 2011 Applies to electrical appliances and materials. Material Safety Act The Law regulates the manufacture and sale of electrical appliances and requires manufacturers and METI importers of these appliances to register with the METI and ensure conformity with technical requirements. Measurement Act 1992 2011 Establishes the units of the SI as the measurement units in Japan and provides the legal basis to apply and METI verify them and certify devices for their measurement.

Source: WTO Secretariat on the basis of information provided by the Japanese authorities.

3.35. Japan's main agencies responsible for standards, technical requirements, and conformity assessment are listed in Box 3.1.

3.36. Up to October 2014, Japan had made a total of 735 notifications, 119 of which being made since 1 January 2011 (including corrigenda and revisions) to the TBT Committee under Article 10.6 of the TBT Agreement. One notification was made of an agreement with another country (Singapore) on issues related to technical regulations, standards or conformity assessment procedures. No WTO Member has used the TBT Committee to raise any concerns about TBT- related issues in Japan since March 2008 when the United States and Australia raised concerns about labelling guidelines on Waygu beef. Japan has used the TBT Committee to raise several concerns with TBT-related measures taken by other Members.21

21 WTO TBT Information Management System online information. Viewed at: http://tbtims.wto.org/.

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Box 3.1 Agencies in charge of TBT issues

Ministry of Economy, Trade and Industry (METI)

Japanese Industrial Standards Committee (JISC) Its functions include deliberations on the development/revision of JIS and making recommendations and reports on consultation responses to the relevant ministers with respect to the promotion of industrial standardization, such as JIS, JIS Mark Certification Scheme, and Laboratory Accreditation System

Japan Accreditation System for Product Certification Bodies of JIS Mark (JASC)

National Institute of Advanced Industrial Science and Technology (AIST)

National Metrology Institute of Japan (NMIJ)

National Institute of Technology and Evaluation (NITE)

International Accreditation Japan (IA Japan)

Specified Measurement Laboratory Accreditation Program (MLAP) Accreditation of laboratories for micro-existent substances (e.g. dioxins)

Japan Calibration Service System (JCSS)

Japan National Laboratory Accreditation System (JNLA)

Japan External Trade Organization (JETRO)

Ministry of Internal Affairs and Communication (MIC)

Telecommunication Technology Committee (TTC)

Japan Cable Television Engineering Association (JCTEA)

Ministry of Agriculture, Forestry and Fisheries (MAFF) Responsible for adopting standards for foodstuffs, agricultural and forestry products and labelling under the Quality Labelling Standard System and the accompanying JAS system

Ministry of Foreign Affairs (MOFA) Notification authority for the TBT Agreement

Ministry of Health, Labour and Welfare (MHLW)

Pharmaceuticals and Medical Devices Agency (PMDA) Reviews and related services, e.g. scientific review of applications for market authorization Post-marketing safety measures, e.g. on the quality, efficacy and safety of drugs and medical devices Promotion of regulatory science Relief services for adverse health effects

Source: WTO Secretariat on the basis of information provided by the Japanese authorities.

3.37. As at 31 March 2014, there were 10,525 Japanese Industrial Standards (JIS), and the number of JIS with corresponding international standards was 5,823. To ensure compliance with the TBT Agreement, Japan has been aligning JIS to international standards if corresponding international standards exist. As at 31 March 2014, the proportion of those JIS which are harmonized with (identical (IDT) or modified (MDF) according to the definition of ISO/IEC Guide 21-1) international standards (ISO and IEC standards) was 97%.

3.38. Between April 2013 and March 2014, 338 JIS items were revised, 83 were withdrawn, and 209 were newly established (Table 3.4).

3.39. Between April 2013 and March 2014, 103 JAS were revised, 14 were withdrawn, and 1 was newly established. As at 31 March 2014, there were 201 JAS in force (the same as in 2011), and the number of JAS with corresponding international standards was 77 as at the end of March 2014. The proportion of those JAS which are harmonized with international standards is 77%.

3.40. The authorities indicate that when international standards do not meet requirements in Japan, domestic standards or technical regulations are needed. For example, tatami (traditional floor coverings), futon (Japanese mattresses), Japanese rice cookers, Japanese electric fans, pocket warmers, and Japanese low tables with heat source, require domestic standards.

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Table 3.4 JIS established, revised, and withdrawn, April 2013-March 2014

Number of Number of Number of JIS in force JIS JIS newly JIS JIS at the end of Divisions established revised withdrawn March 2014 A Civil engineering and architecture 6 27 1 576 B Mechanical engineering 37 67 16 1,672 C Electronic and electrical engineering 50 51 12 1,639 D Automotive engineering 1 6 5 368 E Railway engineering 0 2 0 148 F Shipbuilding 0 0 0 395 G Ferrous materials and metallurgy 38 22 23 455 H Nonferrous materials and metallurgy 5 21 4 411 K Chemical engineering 14 64 2 1,752 L Textile engineering 0 0 0 218 M Mining 4 4 0 166 P Pulp and paper 0 0 0 77 Q Management system 7 6 1 86 R Ceramics 2 7 0 373 S Domestic wares 0 6 0 190 T Medical equipment and safety appliances 18 28 7 536 W Aircraft and aviation 0 0 0 97 X Information processing 7 6 0 522 Z Miscellaneous 20 21 12 844 Packing Welding Radioactivity, etc. Total 209 338 83 10,525

Source: Information provided by the Japanese authorities.

3.41. The process for developing JIS is described in Chart 3.4, while the process used with respect to JAS is in Chart 3.5.

3.42. Approximately 7,873 domestic and 859 foreign factories in 21 countries and economies are certified to affix JIS marks (JIS Mark scheme). The JIS Mark scheme is voluntary unless relevant regulations require JIS for domestic sales. The authorities state that domestic and foreign factories are treated in the same manner with regard to certification of the JIS marks, and the JIS Mark scheme is internationally harmonized, based on ISO/IEC 17065. As at October 2014, 24 organizations were accredited as JIS mark certification bodies.

3.43. Compliance with the JAS is not necessary for imports into Japan except organic plants and organic processed foods of plant origin. The JAS Law allows third-party organizations to certify operators (e.g. manufacturers) to affix JAS marks. The Minister of Agriculture, Forestry and Fisheries as well as Registered Certifying Bodies (RCBs) and Registered Overseas Certifying Bodies (ROCBs) are responsible for monitoring and managing JAS marks.22 Foreign producers or manufacturers that are certified by RCBs and ROCBs may conduct their own grading and affix the JAS marks to their products. At present, there are 28 ROCBs, 18 for organic products, and 10 for forestry products. Under the JAS Law, foreign enterprises certifying operators that produce, process, and/or distribute agricultural or forestry products in conformity with the JAS may be accredited as ROCBs.

22 For further details see WTO document WT/TPR/S/243/Rev.1, 2 May 2011.

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Chart 3.4 Flowchart of JIS developing process

Any interested Parties Relevant Ministries

Entrusted Propose a draft for deliberation of JISC Industrial Association (Drafting Committee) Submit

Publicized at least 3 weeks JIS Drafts before drafting starts

Inquiry

JISC

Publicized at least 3 months Boards before deliberation starts Technical Committee

Report

Publicized at least 60 days Established or revised before deadline as JIS Standards

Announcement Notification in Official Gazette

Source: JISC online information. Viewed at: https://www.jisc.go.jp/eng/jis-act/flow-dev.html .

Chart 3.5 Flowchart of JAS developing bodies

Ministry of Agriculture, Forestry and Fisheries Preparation Body

Prepare and announce "plans concerning establishment of JAS"

Investigation Direction of Investigation (Investigation Institution) Report

Original Proposal Preparation Direction of Original Proposals Preparation (Original Proposal Preparation bodies) Report

Inviting Public Comments Preparation Bodies shall:

• discuss the original proposal with stakeholders. • open the discussion. Consultation with the Council for the Standards for • review based on scientific knowledge. Agricultural and Forestry Products (JAS council )

Notice through Official Gazettes

Note: JAS Council consists of consumers, producers and academic experts. Source: Information provided by the authorities.

3.44. Overseas manufacturers of electrical and consumer products may undergo conformity assessment and certification conducted in foreign countries by foreign registered conformity assessment bodies, in accordance with relevant laws (e.g. the Electrical Appliance and Material Safety Act and the Consumer Product Safety Act). Additionally, under the provisions of the High

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Pressure Gas Safety Law, some cylinders and designated equipment for high pressure gas made by foreign manufacturers are allowed to omit some inspections if the manufacturers are registered with the government. Japan accepts test data on chemical products developed in other countries based on OECD Test Guidelines and OECD GLP principles and the Decision of the OECD Council concerning the Mutual Acceptance of Data in the Assessment of Chemicals.23

3.45. The METI has designated 23 inspection bodies (as in 2013), of which seven are foreign. The designated inspection bodies include: eight bodies under the Consumer Product Safety Act, 11 under the Electrical Appliance and Material Safety Act, 2 under the Law Concerning the Securing of Safety and Optimization of Transaction of Liquefied Petroleum Gas, and two under the Gas Utility Industry Law.

3.46. Japan is a member of the ISO, ITU, the International Electrotechnical Commission, the International Accreditation Forum, the Bureau international des poids et mesures, the Organisation internationale de métrologie légale, and the International Laboratory Accreditation Cooperation as well as several regional standards and accreditation bodies.

3.1.8 Sanitary and phytosanitary measures

3.47. The main changes introduced since 2013 to the legal framework on SPS measures in Japan include the following:

• Regulations under the Plant Protection Act amended in 2013. Changes included: updating the quarantine pest list, the non-quarantine pest list, the table of pest/plant/area combinations subject to: (a) inspection at growing site in exporting countries, (b) import prohibition, and (c) special phytosanitary measures to be carried out in exporting countries.24

• The provisional maximum residue limits (MRLs) for pesticides in feeds, established in 2006 under the Enforcement Ordinance of the Standards of Feed and Feed Additives, were recently revised by the MAFF.25

3.48. The main laws for implementing the SPS Agreement in Japan, together with the agencies responsible, are listed in Table 3.5.

3.49. The MAFF, the MHLW, and the Food Safety Commission continue to be responsible for Japan's SPS measures (Box 3.2). Japan's enquiry point and national notification authority under the SPS Agreement remains the Standards Information Service within the International Trade Division of the MOFA's Economic Affairs Bureau.26 The procedure for establishing SPS measures also remained unchanged during the review period.

3.50. Up to October 2014, Japan had made some 386 notifications, 108 since 1 January 2011 (including corrigenda and revisions) being made to the SPS Committee. Japan has raised its concerns about measures maintained by several Members on import restrictions related to radionuclides, while several other Members have raised or supported concerns about measures maintained by Japan on import restrictions related to foot-and-mouth disease.27

3.51. According to the authorities, SPS measures applied by Japan are based on the relevant international standards. Where such relevant international standards do not exist, SPS measures are based on scientific risk assessment, in accordance with the WTO SPS Agreement. Additionally, the authorities state that, regarding food safety issues, the Japanese Food Safety Commission publishes the result of the risk assessments.

23 Based on the Chemical Substances Control Law. 24 MAFF; and WTO documents G/SPS/N/JPN/316, 28 June 2013; G/SPS/N/JPN/316/Corr.1, 23 July 2013; and G/SPS/N/JPN/316/Add.1, 11 March 2014. 25 WTO documents G/SPS/N/JPN/321, 16 August 2013; and G/SPS/N/JPN/330, 20 January 2014. 26 WTO document G/SPS/ENQ/26, 11 March 2011. 27 WTO SPS Information Management System, http://spsims.wto.org .

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Table 3.5 Principal laws on SPS measures

First Last Legislation/Agency Purpose passed amended Food Sanitation Act 1947 2014 Applies to food and additives, and containers and packaging.

MHLW, Consumer The Act provides for the setting and application of standards Affairs Agency on food additives as well as inspections by the Minister of Health, Labour and Welfare of establishments. Food Safety Basic Law 2003 2013 Aims to promote policies to ensure food safety by: establishing basic policy principles; clarifying responsibilities Consumer Affairs of national and local governments, and food-related business Agency, Food Safety operators and the roles of consumers; and establishing basic Commission direction for policy formulation. Act on Standardization 1950 2013 Applies to foods, drinks, oils, and fats as well as other and Proper Labelling of agricultural, forestry, livestock and fishery products and Agricultural and products made from them except liquors, drugs, and Forestry Products cosmetics.

MAFF, Consumer The Act provides the legal basis for the Japanese Agricultural Affairs Agency Standard (JAS) and criteria for adopting standards, quality grading, labelling, registration of certifying bodies, etc. Act Concerning Safety 1953 2007 Aims to contribute to public safety and stable production of Assurance and Quality livestock products by regulating the production of feeds and Improvement of Feed feed additives, setting official specifications for feeds, conducting tests of feeds in conformity with official MAFF specifications. Plant Protection Act 1950 2012 Provides the legal basis for regulations on plant protection including quarantine for local, import and export plants. MAFF Act on Domestic 1951 2013 Aims to protect and promote the livestock industry by Animal Infectious preventing the outbreak and spread of infectious diseases in Diseases Control domestic animals.

MAFF

Source: WTO Secretariat on the basis of information provided by the Japanese authorities.

Box 3.2 Key agencies responsible for SPS measures

Ministry of Agriculture, Forestry and Fisheries Food Safety and Consumer Affairs Bureau Responsible for SPS measures relating to animal feed, animals, plants, veterinary drugs, etc.

Ministry of Health, Labour and Welfare Department of Food Safety, Pharmaceutical and Food Safety Bureau Responsible for administration of food safety including specifications and standards for food, food additives, pesticide residues, animal drug residues, genetically modified foods and food containers, inspection and safety measures for food.

Cabinet Office - Food Safety Commission Conducting risk assessment on food and making recommendations to relevant ministries Implementing risk communication among stakeholders, e.g. consumers and business operators Responding to food-borne accidents and emergencies.

Ministry of the Environment Responsible for managing risks to the environment from imports, including from invasive alien species.

Ministry of Foreign Affairs Enquiry point and notification authority.

Source: WTO Secretariat on the basis of information provided by the Japanese authorities.

3.52. Regarding food safety measures, in Japan more than 800 pesticides have residues standards and at least 800 food additives are approved for use. According to the authorities, it is very difficult to confirm whether all these substances comply with international standards. While Codex standards are considered in MHLW's risk management, only additives that have been reviewed by the Food Safety Commission and approved by MHLW may be used in food and beverages sold in Japan. This approach is commonly applied not only for food additives but in the setting of all types of food standards.

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3.53. Japan currently imposes import prohibitions on beef and poultry from various countries to prevent the spread of BSE and avian flu.28 The authorities maintain that the process of lifting the import ban includes technical consultations, consideration of import requirements, and the implementation of risk assessment that takes due account of the World Organization for Animal Health (OIE) code,29 and involves consultation with relevant domestic industries, consumers, and requesting countries. Japan has allowed beef imports from the United States, Canada, France, the Netherlands, Ireland and Poland under certain conditions based on scientific review by FSC.

3.54. Under the provisions of the Food Sanitation Act, imported food may be exempted from inspection upon importation into Japan if a cargo is inspected by an official inspection organization in the exporting country and bears the result of the inspection. However, items such as bacteria and mycotoxins, whose characteristics may change during transportation, are not exempted. The inspection bodies must be registered with the government of Japan, through the government of the exporting country.30 As at October 2014, 3,891 such laboratories were registered. In the areas of animal health and plant health, Japan has not accredited any laboratory abroad.

3.55. Japan is a member of the Codex Alimentarius Commission and the OIE, and a contracting party to the International Plant Protection Convention (IPPC). Its contact points are: Director of Plant Quarantine Office, Plant Protection Division, Food Safety and Consumer Affairs Bureau, the MAFF (in relation to IPPC); Director of Animal Health Division, Food Safety and Consumer Affairs Bureau, the MAFF (in relation to OIE); and Director of Office for Resources, Policy Division, Science and Technology Policy Bureau, the Ministry of Education, Culture, Sports, Science and Technology (in relation to Codex). Japan participates in the International Conference on Harmonization toward the harmonization of pharmaceutical standards/regulations.

3.1.9 Labelling and packaging requirements

3.56. Food labelling in Japan continues to be governed by the JAS Law and the Food Sanitation Act. Under the provisions of the JAS law, mandatory labelling standards for food are currently in force. These include: cross-category quality labelling standards for processed foods, fresh foods, and genetically modified foods31, and individual quality labelling standards.32 Food that contains additives must also be labelled with the additives included. Imported processed food does not require labelling of place of origin of the ingredients, which is mandatory for domestically-produced processed food. All organic plants and organic processed foods to be sold in Japan must comply with the JAS organic standards and carry the JAS organic mark.33

3.57. The Food Sanitation Act requires that any allergenic substances contained in processed foods must be indicated on the labels. At present, it is mandatory to include eggs, milk, wheat, buckwheat, peanuts, crab, and shrimps in the description of ingredients, while it is recommended to include abalone, squid, salmon roe, oranges, kiwi fruit, beef, walnuts, mackerel, salmon, gelatine, soybeans, chicken, pork, matsutake-mushroom, peaches, yams, apples, and bananas.

3.58. Under both the Food Sanitation Act and the JAS Law, genetically modified (GM) foods must be labelled as such. Presently, the list of GM products that need to be labelled comprises eight crops (soybeans, corn, rapeseed, potatoes, cottonseed, alfalfa, papaya, and sugar beet) and

28 At the end of October 2014, imports of beef were prohibited from Austria, Belgium, Brazil, the Czech Republic, Denmark, Finland, Germany, Greece, Israel, Italy, Liechtenstein, Luxembourg, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, Switzerland and the United Kingdom. Imports of poultry were prohibited from 57 countries/regions. 29 WTO document WT/TPR/M/211/Add.1, 22 May 2009. 30 Results of examinations based on the AOAC (Association of Analytical Communities) method, which are either endorsed or established by the exporting country, are accepted. 31 Cross-category quality labelling standards are provided for all processed foods and beverages (except alcohol and medical drugs). Fresh foods must be labelled with their name and place of origin. Processed foods must be labelled with the name, the list of ingredients, the net content, the date of minimum durability or use- by date, instructions for storage, the name and address of the manufacturer, and the country of origin (only for imported products). 32 Specific labelling requirements are provided as quality labelling standards for individual products depending on their characteristics. 33 To label food as "organic", certification that the food meets certain JAS requirements is needed from a registered certifying body or a registered overseas certifying body. Only certified food is allowed to be distributed with a JAS organic mark.

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33 kinds of designated processed food, mainly made of soybeans or corn; it also includes the newly added papaya and processed foods containing papaya as a main ingredient. The MHLW does not permit imports of GM foods that do not meet its safety requirements.

3.59. During the period under review, changes to the food labelling system under the Food Sanitation Act included a standard for infant foods labelling34, while under the JAS Law the quality labelling standards for chilled meatballs, and chilled hamburger steaks was changed in 2012.35

3.1.10 Government procurement

3.60. Japan is a party to the WTO Agreement on Government Procurement (GPA). During the review period, some changes were made to Japan's legal framework basically to preclude certain parties from participating in open tendering: (i) a party who is prescribed in Article 32, item 1 of the Act to Prevent Unjust Acts by Organized Crime Group Members36; (ii) parties who intentionally executed construction work, production or other services with poor workmanship, and/or intentionally overcharge by a false report for contracts where the amount to be paid was decided after the contract.37

3.61. To implement the Protocol Amending the WTO Agreement on Government Procurement adopted in March 2012, the relevant Cabinet orders were modified and entered into force on 16 April 2014, the same day as the Protocol came into force in Japan.38

3.62. The government of Japan does not have official data on government procurement spending as a percentage of GDP. However, according to an OECD study, in 2011 Japan spent 15.4% of its GDP on government procurement.39

3.63. The Account Law and relevant ordinances specify the procurement procedures for central government entities, while the Local Autonomy Law and relevant ordinances stipulate the procedures for local governments. Japan's GPA coverage encompasses all central government entities, all 47 prefectures, 19 designated cities (shitei toshi)40, and more than 100 public corporations.

3.64. Regarding its central government entities, Japan recently lowered its thresholds for goods and services under the GPA (excluding construction services and architectural, engineering and other technical services) from 130,000 Special Drawing Rights (SDRs) to 100,000 SDRs.41 The coverage of services for GPA procurement was also recently expanded. In terms of local government procurement procedures, the authorities stated that local government procurement procedures are basically the same as those of the central government, except for Japan's voluntary measures.42

34 WTO document G/SPS/N/JPN/290, 30 January 2012. 35 WTO document G/TBT/N/JPN/335, 17 June 2010. 36 With this purpose, Article 70 of the Budget, Settlement of Account and Accounting Regulations (Imperial Ordinance No. 165 of 1947) was revised on 1 April 2013. 37 Article 71 of Imperial Ordinance No. 165 of 1947 was revised on 1 April 2013. 38 These included the modification of the Cabinet Order Stipulating Special Procedures for Government Procurement of Products or Specified Services (Cabinet Ordinance No. 300 of 1980), and the Cabinet Order Stipulating Special Procedures for Government Procurement of Products or Specified Services in Local Government Entities (Cabinet Order No. 372 of 1995). 39 OECD online information. Viewed at: http://statlinks.oecdcode.org/422013201P1G108.XLS. 40 19 cities are covered under the revised GPA, while 12 are under the GPA 1994. 20 cities have populations over 500,000. 41 See WTO document GPA/W/328, 22 April 2014. 42 Japan's voluntary measures include improved market access and the Operational Guideline on Procedures for Government Procurement. In addition, there are voluntary measures pertaining to individual sectors, such as super-computers, non-R&D satellites, computer products and services, telecommunication, and medical technology. Except for these voluntary measures, certain local authorities (prefectures and designated cities) must comply with the GPA.

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3.65. In addition to its commitments under the GPA, Japan has chapters on government procurement in nine of its EPAs43; the Japan-ASEAN, Japan–Malaysia, Japan-Viet Nam, and Japan-Brunei EPAs do not have such a chapter.

3.66. With regard to the procedures of central government entities, a specific contractor may be selected under the single tendering contract method if, inter alia, the nature or objectives of the procurement does not allow competition, or competition is not possible or disadvantageous to the government because of the urgent nature of the contract, or the contract value is small, in accordance with clause 4 or 5 of Article 29.3 of the Accounts Law. The authorities state that single tendering corresponds to "limited tendering" in the GPA.

3.67. The Act for the Promotion of Use of Wood in Public Buildings, issued in 2010, stipulated promotion of the use of wood in the construction of public buildings; the authorities maintain that the law is operated without distinction between domestic and imported goods. In June 2013, Japan eliminated its goal of covering 50% of domestic demand for wood with domestic supply. It currently does not have a wood self-sufficiency rate as a policy objective.

3.68. In accordance with the Basic Policy for Public Procurement of Information Systems adopted in March 2007, in the event that the amount of the contract affecting a design or development is estimated to be not less than ¥500 million, it must be divided in principle. Government organizations are also required to formulate procurement plans.

3.69. The total value of procurement above the threshold level of 100,000 SDRs specified under Japan's voluntary measures on government procurement was approximately ¥1.83 trillion in 2012 (up by 30.0% from 2011).44 In 2012, open tendering accounted for 68.6% of the total (67.9% in 2011). During the same period, the share of selective tendering in terms of value decreased from 1.5% to 1.2%, and that of single tendering from 30.5% to 30.2%. Procurement of overseas goods and services, supplied by either domestic or foreign suppliers decreased from 7.9% to 6.0% in terms of value. Procurement of foreign goods amounted to 10.3% of the total in 2012, compared with 13.7% in 2011 (Table 3.6).45 Procurement from foreign suppliers increased from 3.1% in 2011 to 3.2% in 2012 in contract terms, but decreased from 3.1% to 3.0% in value terms during the same period. The shares of foreign suppliers in contracts resulting from open and single tenders, respectively, were 1.5% and 4.4% in 2012 (1.4% and 4.8% in 2011). As at 10 May 2014, 66,895 firms (of which 267 were either wholly or partially owned by foreigners) have central-government-wide unified qualification for participating in tendering contracts for, inter alia, manufacturing, sales of products, and offers of service.

3.70. Open tendering is the norm in Japan's government procurement. However, for procurement contracts between the government and a Cooperative Association or Federation of Cooperative Associations of small and medium enterprises (SMEs), the government may use limited tendering procedures, in line with the Cabinet Order Stipulating Special Procedures for Government Procurement of Products or Specified Services (Government Ordinance No. 300 of 1980). Procurement from SMEs is "encouraged" under the Law on Ensuring the Receipt of Orders from the government and Other Public Agencies by Small and Medium Enterprises (enacted in 1966); under the Law, the government, local authorities, and other public agencies must endeavour to expand procurement opportunities for SMEs, by way of, inter alia, providing information on procurement plans. Nonetheless, no tendering is reserved exclusively for SMEs. These laws and regulations apply equally to domestic and foreign SMEs.

43 Japan's EPAs with Chile, India, Indonesia, Mexico, Peru, Philippines, Singapore, Switzerland, and Thailand have chapters on government procurement. 44 For details of Japan's voluntary measures on government procurement, see the Prime Minister of Japan and his Cabinet online information. Viewed at: http://japan.kantei.go.jp/procurement/2013/ch/1- 0FY2013ch1-0.pdf. Procurement for public works (including architectural, engineering and other technical services) is excluded from the measures. Procurement by sub-central government entities is also excluded. 45 Foreign suppliers are defined under the Japan's voluntary measures on government procurement as a "corporation in which approximately more than 50% of shares are owned by foreign investors/capital".

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Table 3.6 Procurement by product and by origin, 2011 and 2012 (¥100 million and %) 2011 2012 Products Total Foreign Total Foreign value share value share 1 Products from agriculture, and from agricultural and food processing 44.8 0.0 21.5 0.5 2 Mineral products 293.2 30.7 518.8 11.0 3 Products of the chemical and allied industries 30.7 7.8 41.1 0.0 4 Medicinal and pharmaceutical products 555.6 14.2 385.3 18.8 5 Artificial resins; rubber, raw hides and skins; leather; and articles thereof 16.4 0.0 16.1 4.9 6 Wood and articles of wood; paper-making material; paper and paperboard 147.3 0.0 188.5 0.0 and articles thereof 7 Textiles and textile articles; thread for spinning and weaving; and articles 80.9 1.4 68.7 2.5 thereof 8 Articles of stone, of cement and similar materials; ceramic products; glass 4.0 0.0 0.4 0.0 and glassware; and articles thereof 9 Iron and steel and articles thereof 177.8 1.3 170.5 0.1 10 Non-ferrous metals and articles thereof 53.8 13.8 41.3 5.3 11 Power-generating machinery and equipment 22.9 7.7 60.0 5.0 12 Machinery specialized for particular industries 171.2 1.3 84.3 2.2 13 General industrial machinery and equipment 74.5 1.7 112.8 0.8 14 Office machines and automatic data-processing equipment 1,669.1 4.7 2,382.7 3.9 15 Telecommunications and sound-recording and reproducing apparatus 468.1 3.0 576.2 2.9 and equipment 16 Electrical machinery, apparatus and appliances, and electrical parts thereof 193.7 6.5 284.6 5.2 17 Road vehicles 299.6 0.6 421.1 1.7 18 Railway vehicles and associated equipment 90.1 56.7 57.9 0.0 19 Aircraft and associated equipment 101.4 54.6 157.6 74.2 20 Ships, boats and floating structures 36.5 0.0 136.3 0.0 21 Sanitary, plumbing, and heating equipment 7.2 0.0 3.5 0.0 22 Medical, dental, surgical and veterinary equipment 613.5 44.3 776.0 25.8 23 Furniture and parts thereof 49.4 0.0 54.5 0.0 24 Scientific and controlling instruments and apparatus 874.3 28.8 1,384.2 20.1 25 Photographic apparatus and equipment, optical goods, and clocks 17.6 9.5 22.7 3.5 26 Miscellaneous articles 1,117.9 5.3 1,059.8 5.9 Total 7,211.4 13.7 9,026.5 10.3

Source: Information provided by the Japanese authorities.

3.71. Most cases of proven infringement of Japan's Antimonopoly Act (AMA) continue to involve bid-rigging related to public works. During 2012-13, one case of bid-rigging involving government officials was made known to the public. In addition, seven cases of disturbance of biddings by procurement officials were criminally charged in 2012 under Article 8 of the "Act on Elimination and Prevention of Involvement in Bid-Rigging etc. and Punishments for Acts by Employees That Harm Fairness of Bidding etc." The Act for Promoting Proper Tendering and Contracting for Public Works defines major policy instruments for preventing bid-rigging and other improper actions. As regards Japan's bid-challenge procedures, complaints about procurement procedures by the central government and public corporations are processed by the Office for Government Procurement Challenge System (CHANS) and considered by the Government Procurement Review Board (GPRB). The Council on Government Procurement Review has decided that in principle the procuring entity should follow the recommendations of the GPRB. Five complaints have been filed since 2011.46 Each local government covered by the GPA has its own review body and its own regulation on the structure and administration of its review body. The authorities state that members of the body are selected in line with Article XVIII:4 of the GPA.

3.2 Measures Directly Affecting Exports

3.2.1 Export procedures and requirements

3.72. According to the World Bank's Doing Business report, in 2014, Japan ranked 20th out of 189 countries and territories for ease of trading across borders at a total time of 11 days and a cost of US$915 for exporting a container (compared to 11 days and US$880 in 2013), of which

46 Of these five complaints, one was dismissed and four were upheld. For details, see Cabinet Office online information (in Japanese). Viewed at: http://www5.cao.go.jp/access/japan/shori-j.html [14 October 2014].

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US$145 and five days is for documents' preparation and two days and US$75 for customs' clearance and technical control.47

3.73. There have been no major changes to the procedures and requirements for exports since the last review of Japan and most requirements are based on international agreements and/or security as well as gathering statistics. The documents required include the export declaration form (Customs form C-5010), invoices, and other papers as required by specific laws and regulations.48

3.74. The principal legislation affecting exports are set out in Table 3.7. In addition, there are several laws applicable to specific groups of products such as the Narcotics and Psychotropics Control Act, the Cannabis Control Act, and the Stimulant Drug Control Act.

Table 3.7 Principal legislation affecting exports

First Last Legislation Purpose passed amended Customs Act 1954 2013 Is the principal legislation covering customs procedures and documentation. Foreign Exchange and Foreign 1949 2009 Sets out the legal basis for registration of exporters and the Trade Control Act application of export controls in specified circumstances. Act on Conservation of 1992 2005 Provides legal basis for the Minister of the Environment to Endangered Species of Wild draft guidelines on conservation of endangered species, the Fauna and Flora requirement to have approval for international trade, and other measures for their protection. Act on Controls on the Illicit 2002 Legal basis for measures in connection with the import, Export and Import and Other export, and recovery of stolen cultural property in order to Matters of Cultural Property ensure proper implementation of the Convention on the Means of Prohibiting and Preventing the Illicit Import, Export and Transfer of Ownership of Cultural Property. Export Trade Control Order 1949 2013 Sets out the products to which export controls apply. Foreign Exchange Order Sets out the technologies (including software) to which export controls apply.

Source: Japanese authorities.

3.75. Under the 2011 amendments to the Customs Act, goods manufactured by an AEO can be exported through another business entity without the goods being placed in a customs area. In the two-year period up to April 2014, the number of AEOs increased by 54 to 523 but there are no data on the value or type of goods exported by AEOs.

3.2.2 Export taxes, charges, and levies

3.76. There are no export taxes, charges, or levies applied by the government or other public authorities in Japan.

3.2.3 Export prohibitions, restrictions, and licensing

3.77. Under the Customs Act, export prohibitions apply to a limited range of products: narcotics and certain other drugs; child pornography; articles which infringe intellectual property rights; and certain articles that constitute unfair competition under the Unfair Competition Prevention Act (essentially related to intellectual property rights as well).

3.78. In addition, the Foreign Exchange and Foreign Trade Control Act provides the legal basis for applying export controls while product lists and detailed operational guidelines are found in secondary legislation, including Cabinet orders, Ministerial orders, etc. The main Orders under the Act are the Export Trade Control Order of 1949 (last amended in 2014) which sets out the goods and their destinations where the permission or approval of METI is required for export, and the Foreign Exchange Order of 1980 (last amended in 2013) which sets out the technologies and

47 World Bank (2014). 48 Japan Customs online information. Viewed at: http://www.customs.go.jp/english/summary/export.htm [September 2014].

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- 45 - destinations where permission from METI is required for transfer outside Japan. These lists of goods and technologies are updated regularly, as are destinations and end-user lists.49

3.79. Japan maintains export controls for security, conservation, and humanitarian reasons, including international commitments such as CITES and Chemical Weapons Convention (CWC) as well as Japan's participation in non-binding arrangements such as; the Wassenaar Arrangement on transfers of conventional arms and dual-use goods and technologies; the Missile Technology Control Regime; the Treaty on the Non-Proliferation of Nuclear Weapons; the Nuclear Suppliers Group; and the Australia Group. For example, METI permission is required for the export of goods and technologies regulated under the International Export Control Conference with the objective of preventing the proliferation of weapons of mass destruction.

3.80. The Trade and Economic Cooperation Bureau in METI is responsible for export control policy and legislation and participation in international export control discussions and negotiations. It is also responsible for issuing export licences and enforcement.

3.81. Most of the products in the lists of goods appended to the Export Trade Control Order and the lists of technologies appended to the Foreign Exchange Order are related to Japan's international commitments or its participation in non-binding arrangements and include a "catch- all" category for products or technologies that could be used in weapons of mass destruction.50 The Export Trade Control Order also includes exports of several agricultural, fishing, and forestry- related products to all regions where METI approval is required.51 In these cases, METI is obliged to obtain the consent of the MAFF before granting a licence.

3.82. To obtain an export licence, the exporter must apply to METI with an application form and supporting documents, including an end-use certificate from the end-user. In practice, licences are refused for military weapons and certain materials which can be used in developing weapons of mass destruction. In December 2011, the government announced that it would permit arms exports to partner countries for joint development provided the government of the country-of- destination obtained consent from Japan before any item exported from Japan was transferred to a third country. For dual-use items, licence approval depends on METI's assessment of the risk which is based on the destination and the end-user although, for the "catch-all" category of products a licence is not required for exports to 27 countries.52

3.83. For technologies, including software, a licence is required for the transfer of a listed technology from Japan to another country, or for transfer within Japan to a non-resident.

3.84. Normally, each consignment of goods for export under the Export Trade Control Order or technology for transfer abroad under the Foreign Exchange Order requires an individual export licence but there are five different kinds of bulk export licences: for regular exports of less-sensitive goods to some locations; for established trading relationships; for re-exports of certain goods for repair or replacement to some locations; and for repeated exports to an overseas subsidiary.53

49 METI online information. Viewed at: http://www.meti.go.jp/english/policy/external_economy/trade_control/index.html [December 2014]. 50 CISTEC (2012), p. 14. 51 Articles 2, 4, and 11 of the Export Trade Control Order and Appended Table 2; rows 28 (wheat bran, rice bran, barley bran); 29 (feed mixtures for cattle, pigs, sheep, goats, deer, chickens, and quail); 30 (mycelia of lentinus edodes); 32 (logs of kalopanax pictus, and quercus); and 33 (eels fry) to all regions; and row 34 (frozen baby clams, hard clams and sea mussels) to the United States (under the Shellfish Sanitation Agreement between Japan and the United States). 52 Argentina, Australia, Austria, Belgium, Bulgaria, Canada, Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Republic of Korea, Luxemburg, Netherlands, New Zealand, Norway, Poland, Portugal, Spain, Sweden, Switzerland, United Kingdom, and United States. 53 CISTEC (2012), pp. 25-26.

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3.2.4 Export support and promotion

3.85. Japan notified the Committee on Agriculture that it had not provided any export subsidies for FY1995-2013.54

3.86. The Japan Bank for International Cooperation (JBIC) and the Nippon Export and Investment Insurance (NEXI) are the official export credits agencies of Japan.55 According to the authorities, provision of these credits is based on the terms and conditions of the OECD Arrangement on Officially Supported Export Credits.56

3.87. NEXI was established in 2001 and took over the export insurance programmes then run by METI. It was established as an incorporated administrative agency under the Act on General Rules for Incorporated Administrative Agencies, and the Trade and Investment Insurance Act. In conducting its business, NEXI provides trade and investment insurance with the objective of breaking-even financially. It offers several insurance products covering different aspects of trade risks as well as investment insurance for Japanese companies. However, export credit insurance represents over 80% of the total underwritten amount which has been relatively stable for the past few years at ¥8.2 to ¥8.6 trillion (Table 3.8).

Table 3.8 NEXI insurance activity, FY2009-13 (¥ million) 2009 2010 2011 2012 2013 Premium income 40,203 39,757 33,378 38,797 31,994 of which Export credit insurance One year or less 3,866 5,754 5,462 5,025 5,612 More than one year 9,730 9,403 8,611 6,918 7,703 Overseas investment insurance 2,956 2,595 3,177 3,718 4,471 Overseas untied loan insurance 21,425 13,477 10,065 17,924 6,078 Reinsurance 597 1,064 1,528 3,207 3,771

Claims paid 10,441 8,574 8,359 4,416 12,234 of which Export credit insurance 9,591 7,346 7,157 3,079 9,675 One year or less ...... More than one year ...... Overseas investment insurance 0 0 0 0 0 Overseas untied loan insurance 0 0 0 0 0 Reinsurance 137 0 0 0 436

Underwritten amount 8,199,062 8,582,951 8,537,772 8,300,064 8,517,171 of which Export credit insurance One year or less 2,747,597 3,498,241 3,321,146 3,451,195 3,855,361 More than one year 3,483,858 3,810,662 3,789,341 2,700,699 2,993,984 Overseas investment insurance 213,193 219,229 440,367 530,106 611,679 Overseas untied loan insurance 1,606,754 741,082 549,068 1,369,370 706,030 Reinsurance 25,885 39,998 51,834 83,311 108,365

.. Not available. Source: NEXI Annual Report 2013.

3.88. In its current form, JBIC was established in April 2012 under the Japan Bank for International Cooperation Act of 2011. It had previously been part of the Japan Finance Corporation although its origins go back to the Export-Import Bank of Japan created in 1950.

3.89. Most of JBIC's lending activities are for overseas investment loans – which represented about three-quarters of the total operations of ¥2,206.1 billion in FY2013. These investments include projects that will deliver raw materials to Japan, projects involving Japanese companies, as

54 WTO document G/AG/N/JPN/174 of 24 February 2012, 185 of 25 April 2013, 176 of 1 May 2012, 156 of 28 May 2010, etc. 55 OECD online information. Viewed at: http://www.oecd.org/tad/xcred/eca.htm [September 2014]. 56 WTO document WT/TPR/S/276/Rev.1, Chapter 3, para. 94, of 18 June 2013.

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- 47 - well as projects abroad using exports from Japan. JBIC also continues to provide direct loans for exports (Table 3.9).57

Table 3.9 JBIC lending and investments, FY2009-13 (¥ billion) 2009 2010 2011 2012 2013 Export loans 97.8 151.2 207.9 126.6 126.2 Import loans 8.2 69.5 172.6 304.3 56.2 Investments 2,193.7 710.3 962.0 3,138.5 1,671.0 Untied loans 344.3 75.8 23.2 293.7 46.0 Equity participation 13.0 19.8 1.5 74.3 97.4 Guarantees 707.9 638.1 228.5 303.2 209.1 Total 3,365.1 1,765.9 1,595.9 4,240.91 2,206.1

Source: JBIC Report on FY2013 JBIC Operations (http://www.jbic.go.jp/en/information/press/press- 2014/0515-21176 [September 2014]).

3.90. JBIC's funding comes from different sources, but are mostly from government accounts or with government guarantees including Government-Guaranteed Foreign Bonds, borrowing from the Fiscal Investment and Loan Program (FILP) and the Foreign Exchange Fund Special Account (FEFSA) (Table 3.10).58

Table 3.10 JBIC funding sources, FY2009-12 (¥ billion) 2009 2010 2011 2012 Capital contribution from FILP industrial investment 20.0 35.5 200.0 69.0 Borrowing from FILP fiscal loan 906.6 690.9 201.0 400.0 Borrowing from FEFSA 987.4 323.5 230.4 1,744.9 Government-guaranteed foreign bonds 626.3 463.3 423.2 205.3 FILP agency bonds 70.0 50.0 50.0 0.0 Other (including repayments) 16.7 (244.4) (6.9) 180.6

Source: JBIC Report on FY2013 JBIC Operations (http://www.jbic.go.jp/en/information/press/press- 2014/0515-21176 [September 2014]).

3.91. JETRO is the official agency responsible for promoting exports through information, research, support for, and participation in, international trade fairs, and other activities to promote exports from, and investment in, Japan. JETRO was originally established in 1958 but now operates as an incorporated administrative agency under the Japan External Trade Organization Incorporated Administrative Agency Act of 2002. JETRO currently has 74 offices around the world.

3.3 Measures Affecting Production and Trade

3.3.1 Taxes

3.92. Total tax revenue in Japan in FY2013 was ¥46,953 billion with the biggest contributions from income tax (33% of the total), consumption tax (23%), and corporation tax (22%) suggesting that the tax base is quite narrow although the total for income tax includes capital gains tax (Table 3.11).

3.93. For FY2013 and 2014, the Ministry of Finance has made or proposed a number of changes to the taxes:

• Introducing a new 45% (plus an additional 10% for local taxes) marginal rate for individual income tax for incomes over ¥40 million;

• Introducing a tax exemption for small investments (new investment of up to ¥1 million per year) in special accounts for 10 years;

57 JBIC (2013). 58 MOF online information. Viewed at: http://www.mof.go.jp/english/filp/filp_report/zaito2013/index.html [November 2014].

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• Extending and improving tax incentives for housing;

• Increasing inheritance tax by reducing deductions and raising the highest marginal rate to 55% while encouraging earlier transfers and business succession;

• Encouraging investments by corporations through relaxed capital allowances and tax credits for production facilities, energy-related facilities, and research and development spending; and

• Abolishing the special corporate tax of 10% one year ahead of schedule. The special corporate tax was introduced at the start of FY2012 for reconstruction after the Great East Japan Earthquake and was abolished end-FY2013.59

Table 3.11 Tax revenue, FY2009-13 (¥ billion) 2013 2009 2010 2011 2012 Revised estimate Income tax 12,913,887 12,984,351 13,476,192 13,992,487 15,530,813 Corporation tax 6,356,407 8,967,688 9,351,426 9,758,311 10,493,718 Inheritance tax 1,349,778 1,250,439 1,474,381 1,503,946 1,574,336 Consumption tax 9,807,541 10,033,311 10,194,597 10,350,429 10,829,301 Liquor tax 1,416,756 1,389,290 1,369,318 1,349,638 1,347,000 Tobacco tax 822,383 907,671 1,031,547 1,017,942 1,037,548 Gasoline tax 2,715,189 2,750,101 2,648,399 2,621,915 2,574,263 Liquefied petroleum gas tax 12,324 11,888 11,301 10,713 10,265 Aviation fuel tax 79,266 74,931 46,247 49,360 52,188 Petroleum and coal tax 486,791 501,932 519,103 566,946 599,473 Promotion of power resources development tax 329,277 349,166 331,379 328,049 328,292 Motor vehicle tonnage tax 635,112 446,541 447,754 396,894 381,356 Customs duty 731,880 785,881 874,227 897,230 1,034,379 Tonnage tax 8,851 9,512 9,681 9,829 9,972 Other 63 70 177 42 122 Stamp revenue 1,067,572 1,024,021 1,046,873 1,077,676 1,126,069 Total for general account 38,733,076 41,486,794 42,832,602 43,931,407 46,952,947

Source: FY2011 and FY2012 Survey of the Settled Amount of Tax and Stamp Revenues. Viewed at: http://www.mof.go.jp/tax_policy/reference/account/h21.pdf , http://www.mof.go.jp/tax_policy/reference/account/h22.pdf , http://www.mof.go.jp/english/tax_policy/account/h2011e.pdf , http://www.mof.go.jp/english/tax_policy/account/h2012e.pdf , and http://www.mof.go.jp/english/tax_policy/account/h2013e.pdf.

3.3.1.1 Income tax

3.94. There are six brackets for income tax with a top rate (including inhabitants tax) of 40% on taxable income over ¥18 million. A new bracket of 45% for taxable income of more than ¥40 million is to be introduced for 2015. However, about 80% of taxpayers are in lower tax bands and pay a marginal rate of 10% or less.60

3.95. Income tax covers ten different categories of income: interest; dividends; real estate; business; employment; retirement; timber; capital gains; occasional; and miscellaneous. However, income from capital gains, interest, and dividends are taxed at 20% while retirement income and income from timber are also treated differently. Income from all ten categories is included under income tax.

59 MOF (2013b); and MOF (2013a). 60 MOF (2013c), p. 13.

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3.3.1.2 Corporation tax

3.96. Corporation tax is charged on worldwide income for domestic corporations (defined as those whose head office is located in Japan – which, under the Commercial Code, means all companies incorporated in Japan). Foreign companies are subject to corporation tax or withholding tax on income from within Japan.

3.97. The corporation tax rate on corporate incomes was reduced from 30% to 25.5% in FY2012, although it has been reported that when other taxes (see local taxes below) are added the total effective tax rate on corporations is about 34.62%. However, only about 30% of corporations have taxable profits.61

3.98. An enterprise that undertakes to maintain specified bookkeeping records and documentation and gains approval from the Director of the District Tax Office can file a blue return that entitles it to several concessions including:

• The right to carry forward tax losses for nine years (increased from seven years in April 2012) or carried back to the previous year;

• The authorities may correct the corporation's estimate of income only when errors are found when the accounts are examined. In making corrections to a tax return, the authorities must provide detailed reasons in writing; and

• Special taxation measures such as special depreciation and tax credits as set out in the Special Taxation Measures Law.

3.3.1.3 Corporation tax-based incentives

3.99. Tax incentives are used in Japan to encourage investment in specific areas and in specific activities (research and development). In general the tax credit of 8-10% of spending on specified R&D can be counted against corporation tax up to a limit of 20% of corporation tax payable (30% for FY2013-2014) with higher credits available if R&D spending has increased compared to the previous three years. There are also tax incentives to encourage global enterprises to establish R&D subsidiaries or regional headquarters in Japan by reducing taxable income from approved activities by 20%.

3.100. In addition, for FY2011-2015 incentives are available for creating employment, for FY2013-2017 for increasing wages and, for FY2013-2016, for purchases of machinery and equipment under certain circumstances.

3.101. In addition, where qualified companies implement the relevant projects in designated Comprehensive Special Zones for International Competitiveness62, they may qualify for preferential treatment of either:

• specially recognized capital allowances (50% of acquisition price of equipment (25% for buildings)) or tax credits (15% of acquisition price of equipment (8% for buildings)) calculated based on the price of assets/buildings acquired between 1 August 2011 and 31 March 2016; or

• a 20% deduction for five years in taxable income from certain business activities conducted based on plans approved by the Prime Minister between 1 August 2011 and 31 March 2016; while

• other incentives exist for Comprehensive Special Zones for Local Revitalization.63

61 MOF (2013c), p. 15. 62 Hokkaido, Ibaraki, Tokyo, Kanagawa, Aichi/Gifu/Mie/Nagano/Shizuoka, Kyoto/Osaka/Hyogo, and Fukuoka. 63 Cabinet Secretariat online information. Viewed at: http://www.kantei.go.jp/jp/singi/tiiki/sogotoc/ [September 204].

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3.102. Following the 2011 Great East Japan Earthquake, a variety of measures were introduced in severely damaged areas to encourage reconstruction which included tax credits of 10% of salaries plus employee expenses, special capital allowances or tax credits on acquired assets, and a five-year exemption from corporation tax for new enterprises.64

3.103. The Act on Special Measures Concerning Taxation of 1957 (last amended in 2014) also includes a variety of tax incentives which include accelerated capital allowances, tax credits, and reduction in taxable income for enterprises in international strategic comprehensive special zones, reduced taxation for income from research and development for approved enterprises and other measures to reduce tax for enterprises in specified areas.

3.3.1.4 Consumption tax

3.104. Consumption tax is charged on the value added principal for asset transfers (defined as sale or lease of assets or services), that is, tax paid on purchases is deducted from tax received for sales and the balance paid to the State. In April 2014, the tax was increased from 5% to 8% and the government intends to increase it again to 10% in April 2017. The tax is charged at the point of transferring goods and providing services or, for imports, when cargo is retrieved from a bonded area. For domestic transactions, an enterprise is required to make an annual transfer to the State of the balance between consumption tax paid on inputs and charged on sales. There are relatively few non-taxable transactions – mainly medical, nursing, and educational services as well as financial transactions – and there are provisions for exemptions for small enterprises (taxable sales of ¥10 million or less). In addition, there are several types of transactions that are exempt from consumption tax including exports, international aviation, and international transport services.65

3.3.1.5 Local taxes

3.105. Local taxes payable by enterprises include:

• Inhabitant taxes, which are prefectural and municipal taxes comprised of a per capita rate and a corporate tax rate, where;

o The per capita rate is computed and levied without regard for income of the enterprise; and

o The corporate tax rate is assessed based on the corporation tax paid by the enterprise in the current fiscal year (from 1 October 2014) at 3.2-4.2% for a prefecture, and 9.7-12.1% for a municipality;

• Enterprise tax which may be charged by prefectures based on taxable income, paid in capital and value added up to the rates set out in Table 3.12;

• Business office tax for companies with premises larger than 1,000 m2 and/or more than 100 employees in certain cities at ¥600 per m2 and 0.25% of total employee remuneration; and

• Fixed assets tax of 1.4% of the value of fixed assets.

64 Reconstruction Agency online information. Viewed at: https://www.reconstruction.go.jp/english/topics/2013/03/special-zones-for-reconstruction.html [September 2014]. 65 For non-taxable transactions, consumption tax paid on inputs is not deductible, whereas for exempt transactions, consumption tax paid on inputs is deductible from the regular settlement for the tax.

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Table 3.12 Maximum rates of enterprise taxes

Rate (%) Tax base Rate (%) From 1 Oct. 2014 Capital less than ¥100 million Net income 5.30 6.70 Capital greater than ¥100 million Net income 2.90 4.30 Value added 0.48 0.48 Paid in capital 0.20 0.20 Electricity, gas supply, and insurance companies Gross receipts 0.70 0.90

Source: Authorities.

3.3.1.6 Excise duties

3.106. Total revenue from all excise duties (Table 3.13) contributed approximately 12% to total tax revenue in FY2013 where gasoline and liquor taxes contributed more than other excise duties combined (Table 3.11). In general, excise duties are charged at point of shipment from the place of manufacture or from the bonded area, although there are provisions for payment at the end of the month following shipment/withdrawal or even later if the tax-payer provides a security. Exports are exempt from excise duties.

Table 3.13 Excise duties

Duty ¥ Liquor tax (¥/kl) Sparkling alcohol drinks 220,000 Low malt beer (25-50% malt) 178,125 Low malt beer (less than 25% malt) 134,250 Other 80,000 Fermented liquor 140,000 Refined sake 120,000 Wine 80,000 Shochu, etc. 200,000 plus 10,000 per 1% alcohol over 20% Whisky, brandy, spirits 370,000 plus 10,000 per 1% alcohol over 37% Blended liquor 220,000 plus 11,000 per 1% alcohol over 20% Sake compound 100,000 Mirin 20,000 Sweet wine or liqueur 120,000 plus 10,000 per 1% alcohol over 12% Powdered liquor 390,000 Tobacco taxes General rate Tobacco tax 5,302 per 1,000 cigarettes Special tobacco tax 820 per 1,000 cigarettes a Reduced rate (for 3rd grade tobacco) Tobacco tax 2,517 per 1,000 cigarettes Special tobacco tax 389 per 1,000 cigarettes Gasoline tax 48,600 per kl Liquefied petroleum gas tax 17.5 per kg Aviation fuel tax 18,000 per kl Petroleum and coal tax Crude petroleum 2,540 per kl Natural gas 1,600 per tonne Coal 1,140 per tonne Local gasoline tax 5,200 per kl b Motor vehicle tonnage tax 3 year inspection certificate Passenger vehicles Private 12,300 per 0.5 tonne or part thereof Light motor vehicles Private 9,900 Motorcycles Private 5,700 Business 4,500 2 year inspection certificate Passenger vehicles Private 8,200 per 0.5 tonne or part thereof Trucks over 2.5 tonnes Private 8,200 per tonne or part thereof Business 5,200 per tonne or part thereof Trucks under 2.5 tonnes Private 6,660 per tonne or part thereof Business 5,200 per tonne or part thereof Light motor vehicles Private 6,600 Business 5,200

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Duty ¥ 1 year inspection certificate Passenger vehicles Private 4,100 per 0.5 tonne or part thereof Business 2,600 per tonne or part thereof Trucks over 2.5 tonnes and buses Private 3,300 per tonne or part thereof Business 2,600 per tonne or part thereof Trucks under 2.5 tonnes Private 3,300 per tonne or part thereof Business 2,600 per tonne or part thereof Light motor vehicles Private 3,300 Business 2,600 Motorcycles Private 1,900 Business 1,500 Vehicles not needing inspection certificate Two wheeled Private 4,900 Business 4,100 Other Private 9,900 Business 7,800 Promotion of power-resources development tax 375 per 1,000 kW/h a The reduced rate of tobacco tax applies to a limited number of brands of 3rd grade cigarettes (MOF online information. Viewed at: http://www.mof.go.jp/tax_policy/summary/consumption/127.htm [November 2014]), all of which are owned by Japan Tobacco. b Motor vehicle tonnage tax is payable at each inspection. Personal cars and motorcycles: the first inspection at 3 years and at 2 year intervals thereafter. Personal light trucks: inspection every 2 years. Personal trucks: the first inspection at 2 years with an inspection each year thereafter. Business cars: an inspection every year. Special vehicles: an inspection every 2 years. Source: Ministry of Finance, Tax Bureau (2014).

3.3.1.7 Tax treaties

3.107. Japan has, or is a party to, 62 tax conventions applicable with 85 jurisdictions, including other signatories to the Convention on Mutual Administrative Assistance in Tax Matters (Table 2.4).

3.3.2 Subsidies and support

3.108. Support given to agriculture (section 4.1.2.3), fisheries (section 4.2.3.4), maritime services (section 4.6.1) is detailed in other sections of this report. Support for exports and provided through taxation measures is detailed above.

3.109. The last notification to the Committee on Subsidies and Countervailing Measures under Article XVI:1 of GATT 1994 and Article 25 of the Agreement on Subsidies and Countervailing Measures includes a list of 55 different schemes with another two (for fisheries) in a supplemental notification.66 The schemes covered by the notification are primarily for small crafts, minerals and fuels, and agriculture and fisheries for the period FY2009-11. For non-agricultural and non-fisheries subsidies, subsidies for loans for purchasing petroleum and LPG for stockpiling by private companies accounted for ¥556 billion out of a total of ¥708 billion while minerals-related subsidies accounted for most of the remainder.

3.110. The FY2014 Subsidy Program for Projects Promoting FDI, Site Location and Regional Development in Japan provides for subsidies for survey design for buildings, facility costs, equipment costs, and facility lease fees. The subsidies rates are up to one-half for SMEs and one- third for other enterprises up to a limit of ¥500 million.67

3.111. Several other programmes also exist to support small and medium enterprises. These programmes were expanded in FY2013 to include, inter alia, projects to support manufacturing (FY2013 budget of ¥11.9 billion), and support for business creation (¥4.8 billion), in addition to existing programmes which included direct support for financing (¥26.5 billion). However, most support in FY2013 was focused on reconstruction after the Great East Japan Earthquake. In addition to direct support, SMEs also qualify for loans from public financial institutions and loan

66 WTO document G/SCM/N/253/JPN of 8 July 2013, Suppl. 1 of 17 March 2014. 67 JETRO (2014).

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- 53 - guarantees: at end FY2012, out of a total value of outstanding loans of ¥240 trillion, 9.5% was from public financial institutions and another 13.6% was guaranteed.68

3.112. In March 2014, it was reported that METI would start providing subsidies for energy storage systems (lithium-ion batteries). The subsidies would be available for households (up to ¥1 million) and commercial enterprises (up to ¥100 million) with a total budget of ¥10 billion.69 Another report also stated that the government intended to introduce a subsidy for vehicles powered by fuel cells at ¥2 million per vehicle with further support in some prefectures for local purchases.

3.3.3 State-owned enterprises70

3.113. As in other countries, in Japan there are some enterprises which the State or a public authority wholly or partly owns or controls which provide services or goods to businesses or the public. In some cases, these goods or services could be provided by the private sector, but for a variety of reasons, including market failure, the private sector may not offer adequate coverage or may not be involved at all.

3.114. At the State level, many of these agencies are incorporated administrative agencies. These are agencies established: "for the purpose of efficiently and effectively conducting affairs and businesses that need to be securely implemented from a public viewpoint, such as the stability of the lives of citizens, society and the economy, and that are, among those that do not need to be directly implemented by the State itself, those that may not necessarily be implemented properly if entrusted to private entities or those that need to be conducted monopolistically by a single entity."71 The system of incorporated administrative agencies was introduced in 2001 as part of the Central Government Reform of Japan to separate the functions of policy and legislation on one side and implementation on the other. Most incorporated administrative agencies were established under the Act on General Rules of Incorporated Administrative Agencies of 1999 plus a law specific to the agency in question (e.g. NEXI) was established under the Act on General Rules for Incorporated Administrative Agencies of 1999 and the Trade Insurance and Investment Act of 1950). In some cases entities equivalent to incorporated administrative agencies have been established under specific laws (e.g. the National University Corporation established under the National University Corporation Act of 2003).

3.115. As at November 2014, there were 98 incorporated administrative agencies in Japan. Many are engaged in research, and some carry out official functions usually reserved for the State, such as national archives and national statistics. However, some of them appear to be engaged in delivery of goods and services which the authorities believe would not be adequately provided by the private sector. These include some of the functions of NEXI (section 3.2.4), the Agriculture Livestock Industries Corporation (ALIC) (section 4.1.2.3, which has been notified to the WTO as a state trading enterprise), and the Japan Housing Finance Agency (JHF). A full list of incorporated administrative agencies is in Table A3.2.

3.116. In addition, there are other state-owned agencies which are not classed as incorporated administrative agencies, such as Japan Post Holdings Co. Ltd, and some offices in certain ministries are involved in commercial activities, such as the MAFF which imports rice, wheat, and barley.

3.117. Japan has notified four entities as state trading enterprises under Article XVII of GATT 1994 and the Understanding on the Interpretation of Article XVII (Table 3.14).72

68 METI (2013b), pp. 10 and 12. 69 Colthorpe A. (2014). 70 State-owned enterprises are not necessarily state-trading enterprises in the sense of Article XVII of GATT 1994 or the Understanding on the Interpretation of Article XVII. 71 Article 2, Section 1, Act on General Rules for Incorporated Administrative Agencies of 1999. 72 WTO document G/STR/N/15/JPN of 11 July 2014.

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Table 3.14 State trading enterprises notified to the WTO under Article XVII

Agency Role Trade-related activities Japan Tobacco Inc. JT is mainly engaged in the manufacture JT purchases all the leaf tobacco produced by and sale of tobacco products, prescription domestic tobacco cultivators who enter into drugs, beverages and processed foods. It contracted purchase agreement with JT. has a monopoly on tobacco production in Japan. Ministry of Health, Supply of opium for medical and scientific MHLW carries out all imports and purchases all Labour and Welfare purposes, as well as to conduct necessary domestic production of opium and poppy straw. (MHLW) control over the cultivation of opium There are no exports. poppy, and the transfer, receipt and possession and other relevant activities concerning opium and poppy straw. Ministry of MAFF can import rice, wheat and barley, Almost all imports of rice, wheat, and barley are Agriculture, Forestry and can export rice when particular carried out by MAFF. In FY2011-13, MAFF and Fisheries (MAFF) necessity exists, based on the Law for purchased limited quantities of domestic rice Stabilization of Supply-Demand and Price production as a public stock against a possible of Staple Food. supply shortage and did not purchase domestic production of wheat and barley. Agriculture and ALIC, as a state trading enterprise, imports ALIC's role as an importer of dairy products Livestock Industries designated dairy products to ensure proper declined in the period 2011-13, although it still Corporation (ALIC) and smooth operation of the system to imported over 25% of whey and butter in 2013 stabilize supply/demand and price of the and recommenced imports of SMP. It exported designated milk products. nothing nor bought any domestic production.

Source: WTO document G/STR/N/15/JPN of 11 July 2014.

3.118. A 2014 report by the OECD defined a state owned enterprise as an autonomous public entity involved in commercial activities and controlled, directly or indirectly, by central government. Based on this definition, the Japanese authorities identified:

• two minority-owned listed entities (Japan Tobacco and Nippon Telegraph and Telephone Corporation) with a combined market value of ¥10,884 billion,

• eight majority-owned non-listed enterprises with a combined market value of ¥14,794 billion, and

• 16 statutory corporations or quasi-corporations with a combined value of ¥12,286 billion.

3.119. Most of these entities are primarily engaged in transportation although the largest, in value terms, was a majority-owned non-listed enterprise in the "other activities" category which was valued at ¥12,448 billion (presumably this is Japan Post Holdings) (Table 3.15).73

Table 3.15 Aggregate data on State-owned enterprises in Japan

Minority-owned listed Majority-owned non- Statutory corporations and entities listed entities quasi-corporations No. Market value (¥ billion) No. Value (¥ billion) No. Value (¥ billion) Total 2 10,884 8 14,794 16 12,286 Primary sectors 1 27 Finance 6 10,293 Telecoms 1 5,432 Transport 5 2,298 9 1,966 Other utilities 1 12,448 Other activities 1 5,452 2 49

Source: OECD (2014), The Size and Sectoral Distribution of SOEs in OECD and Partner Countries, OECD Publishing, p. 40. Viewed at: http://dx.doi.org/10.1787/9789264215610-en [September 2014].

3.120. In the context of this trade policy review, the authorities indicated that there are six enterprises in Japan that meet the criteria in Table 3.16 for large (i.e. operating revenue greater than ¥100 billion) commercial entities wholly- or partially-owned or controlled by the State or other public authorities. Some of these entities may have been included in the aggregate data on State-owned enterprises in Table 3.15.

73 OECD (2014b), p. 10.

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Table 3.16 Large state enterprises, FY2013 (¥ billion)

Name/operation holding holding revenue revenue Government Government contribution to Total operating Total operating before/after tax tax before/after Total asset value Total operating profit Total operating State/public authority State/public revenue and/or equity equity and/or revenue New Kansai International Airport Company Ltd Established in 2012 for the operation of Kansai International Airport 1,985 127 32/24 4 100% shares and Itami Airport Narita International Airport Corporation Ltd Established in 2004 for the operation of Narita International Airport 859 199 33/20 0 100% shares Nippon Telegraph and Telephone Corporation Owns all the shares issued by NTT East, NTT West. Required to 7,302 431 277/279 0 35.65% ensure proper and stable provision of telecommunications services by shares these companies throughout Japan, including remote rural areas, as (36.56% well to conduct research relating to telecommunications technologies. voting) Japan Post Holdings Co. Ltd Owns all the shares issued by Japan Post Co. Ltd 9,711 265 122/145 0 100% shares Japan Finance Corporation Finance 24,653 788 -36 402 100% shares (excluded from tax) Japan Tobacco Inc. JT is mainly engaged in the manufacture and sale of tobacco 4,611 2,400 648 0 33.35% products, prescription drugs, beverages and processed foods shares

Note: Enterprises which have commercial operations operate in areas in competition with other privately-owned enterprises, or in areas which could be in competition with privately owned enterprises; and the State or other public authority may exert some degree of control over these enterprises: - through the terms of the law establishing the enterprise; - by owning all or part of the voting shares; or - by having the right to assign all or part of the voting shares to particular groups or individuals; or - have a special right or privilege granted by the State, such as exemptions from competition policy, credit or debit guarantees, or direct or indirect subsidies from the State; and - have an operating revenue greater than ¥100 billion. Source: Japanese authorities.

3.121. In addition, there are several other agencies which are involved in commercial activities which are not included in the above list and have operating revenues of over ¥100 billion. These include:

• Tokyo Metro Co. Ltd, which is owned 53.4% by the government and 46.6% by the Tokyo Metropolitan Government, and, in FY2014, had an operating revenue of ¥394 billion and an operating profit of ¥100 billion74;

• Japan Petroleum Exploration Co. Ltd (JAPEX) in which METI has 34% of voting rights, had, in FY2014, net sales of ¥277 billion and a net income of ¥29 billion75;

• INPEX, in which METI has 18.94% of shares, had, in FY2014, net sales of ¥1,335 billion and an operating income of ¥734 billion.76 INPEX also has 4.99% of voting rights shares in JAPEX; and

• Japan Railway Construction, Transport and Technology Agency (JRTT) which is wholly- owned by MLIT. In addition to research and promotion of technology relating to transport, JRTT owns JR Hokkaido, JR Shikoku, JR Kyushu, and JR Freight, provides subsidies to some railway and shipping companies, constructs and leases railway lines,

74 Tokyo Metro online information. Viewed at: http://www.tokyometro.jp/corporate/ir/accounting/index.html (Japanese) [September 2014]. 75 JAPEX (2014), p. 29. 76 INPEX (2014), pp. 96 and 135.

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and wholly and partly owns shipping vessels. In FY2013 JRTT had gross income of ¥902 billion and net income of ¥19 billion (see also section 4.6.3).77

3.3.4 Competition policy

3.3.4.1 Recent developments

3.122. The AMA was amended in December 2013, inter alia, to abolish the hearing procedure of the Japan Fair Trade Commission (JFTC) for administrative appeals.78 Once the Act comes into force, any appeal regarding decisions of the JFTC will be subject to the exclusive jurisdiction of the Tokyo District Court, with a panel of three or five judges hearing cases with a view to ensuring expertise and enhancing procedural fairness. The changes made to the AMA also seek to further improve hearing procedures within the JFTC prior to issuing final orders, such as cease and desist orders.

3.123. The independence of the JFTC is maintained under the amended AMA. The JFTC is administratively attached to the Cabinet Office but its chairman and commissioners perform their functions independently and cannot be dismissed against their will during their terms of office. The budget of the JFTC increased from ¥8.8 billion in FY2013 to ¥11.3 billion in FY2014; it had 830 officials in FY2014 (823 officials in FY2013).

3.3.4.2 Exemptions from prohibition of cartels

3.124. Table 3.17 summarizes the exemptions for the prohibition of cartels contained under the AMA and individual laws; 22 practices under 16 laws are now exempt under these provisions.

Table 3.17 Exemptions under the Anti-Monopoly Act and individual laws

Relevant ministries and Legislation System agencies 1. Exemptions under the AMA (1 law, 3 systems) Japan Fair Trade Commission Section 21 Acts under intellectual property rights Section 22 Acts of cooperatives Section 23 Resale price maintenance contracts concerning published works 2. Exemptions under various individual laws (15 laws, 19 systems) Financial Services Agency Insurance Business Act Insurance cartels Act on Non-Life Insurance Rating Exemptions concerning compulsory Organization of Japan automobile insurance and earthquake insurance Ministry of Justice Corporate Reorganization Act Reorganization company's acquisition of its shares Ministry of Finance Act on Securing of Liquor Tax and on Rationalization cartels Liquor Business Associations Ministry of Education, Culture, Copyright Act Cartels on fees for secondary use of Sports, Science and Technology commercial phonograms Ministry of Health, Labour, Act on Coordination and Improvement of Cartels to prevent excessive Welfare Environmental Health Industry competition Ministry of Agriculture, Forestry Agricultural Cooperatives Act Federations of agricultural and Fisheries cooperatives; Agricultural Association Corporation Ministry of Economy, Trade and Export and Import Transaction Act Cartels on export Industry Act on the Organization of Small and Joint economic undertakings Medium-Sized Enterprise Association Small and Medium-Sized Enterprise Federations of small business Cooperatives Act associations Ministry of Land, Infrastructure, Marine Transportation Act Maritime transportation cartels Transport and Tourism (international); maritime transportation cartels (coastal service) Road Transportation Act Transportation cartels Civil Aeronautics Act Aviation cartels (international); aviation cartels (domestic)

77 JRTT (2014). 78 On 7 December 2013, the AMA Amendment Bill was approved in the 185th extraordinary session of the Diet, and the Enacted Act was promulgated on 13 December 2013. The Enacted Act is expected to come into force in 2015.

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Relevant ministries and Legislation System agencies Coastal Shipping Associations Act Maritime transportation cartels (coastal service); joint shipping businesses Special Measures Act on the Proper Cartels on reduction in the number of Management and Revitalization of the vehicles Taxi Business in Specified and Semi- Specified Regions

Source: Information provided by the Japanese authorities.

3.3.4.3 Holding companies, and mergers and acquisitions

3.125. Chapter 4 of the AMA prohibits mergers and acquisitions if they would cause a substantial restraint of competition.79 A company must submit a business report to the JFTC, within three months of the end of each business year, if the total assets of the company and its subsidiaries exceed specified thresholds: ¥600 billion for a holding company, ¥8 trillion for a financial company, and ¥2 trillion for other companies.80 In FY2013, 100 business reports (the same as in FY2011) were submitted under Section 9 of the AMA (33 holding companies). There were no notifications of establishment of new holding companies under Section 9 in FY2013 (none in FY2011).

3.3.4.4 International arrangements

3.126. Most of Japan's EPAs provide for each party to take appropriate measures against anti-competitive activities in accordance with its laws and regulations, and to cooperate in controlling anti-competitive activities, e.g. by notifying the other party of enforcement activities, cooperation, coordination, requests for enforcement activities, and consideration of the other party's interests.81 Japan has three other bilateral cooperation agreements on anti-competitive activities, with Canada, the European Union, and the United States. Furthermore, during the review period the JFTC concluded three memoranda on cooperation with the competition authorities of Viet Nam (28 August 2013), the Philippines (28 August 2013), and Brazil (24 April 2014).

3.3.4.5 Enforcement

3.127. Investigations into possible violations of the AMA may be initiated as a result of reports from the general public, detection by the JFTC itself, notifications by the Small- and Medium- Enterprise Agency, or reports by leniency applicants. The AMA provides two types of measures to impose sanctions and thereby deter violations of the Act: administrative measures, such as surcharges and orders to take "elimination measures" (cease and desist orders) and criminal penalties.82 In addition, to these measures, the AMA allows those affected by specific violations of the AMA to bring private damages actions (Table 3.18).

79 "Substantial restraint of competition" means a situation where a market structure changes as a result of a merger, and specific companies can control the market by influencing variables such as price, quality, and quantity. 80 A newly-established company that corresponds to any of these thresholds must submit a notification to the JFTC, within 30 days of establishment. 81 EPAs with: Chile, Chapter 14; India, Chapter 11; Indonesia, Chapter 11; Malaysia, Chapter 10; Mexico, Chapter 12; Peru, Chapter 12; the Philippines, Chapter 12; Singapore, Chapter 12; Switzerland, Chapter 10; Thailand, Chapter 12; and Viet Nam, Chapter 10. There is no chapter on competition in the EPAs with ASEAN or Brunei Darussalam. 82 Criminal penalties include imprisonment of up to five years or a fine of up to ¥5 million for private monopolies and unreasonable restraint of trade, and imprisonment of up to two years or a fine of up to ¥3 million for international agreements constituting unreasonable restraint of trade and unfair trade practices, restrictions of the number of members of trade associations, and violations of final and binding decisions by the JFTC. These criminal proceedings may be initiated only after an accusation is filed by the JFTC with the Public Prosecutor General. Appeals are available in the high courts and eventually the Supreme Court.

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Table 3.18 Enforcement of competition policy, 2009-13

Fiscal year Details 2009 2010 2011 2012 2013 (A) Cease and desist orders Number of cases 26 12 22 20 18 Private monopolization 0 0 0 0 0 Cartels 22 10 17 20 17 Price-fixing cartels 5 6 5 1 8 Bid-rigging 17 4 12 19 9 Unfair trade practices 4 2 5 0 1 Commenced hearings 12 8 40 22 12 (B) Surcharge payment orders Number of addresses 85 152 280 108 176 Surcharge amount (in ¥ billion) 36.07 72.08 44.25 25.07 30.24 Commenced hearings 13 22 45 25 13 (C) Recently processed investigation cases Cases investigated Carry-overs from the previous fiscal year 19 22 23 9 13 New cases begun during the current fiscal year 133 143 157 266 137 Total 152 165 180 275 150 Cases processed Legal measures Cease and desist orders 26 12 22 20 18 Surcharge payment ordersa 0 0 0 0 0 Sub-total 26 12 22 20 18 Others Warnings 9 3 2 6 1 Cautions 69 95 138 208 114 Discontinued casesb 26 32 9 28 7 Sub-total 104 130 149 242 122 Total 130 142 171 262 140 Carry-overs to the next fiscal year 22 23 9 13 10 Criminal accusations 0 0 0 1 1

a Surcharge payment orders were made without a recommendation or cease and desist order. b Discontinued due to lack of evidence of wrong-doing. Source: Information provided by the Japanese authorities.

3.3.5 Intellectual property rights (IPRs)

3.3.5.1 Overview

3.128. The legal framework on IPRs in Japan has remained largely unchanged since its last review although some legislation was amended in 2014. The principal legislation relating to IPRs in Japan is listed in Table 3.19.

3.129. The Intellectual Property Strategy Headquarters (the Headquarters) was established in the Cabinet Secretariat in March 2003 with the purpose of developing measures to fulfil the mandates and to coordinate the work of various governmental authorities responsible for administration and enforcement of IPRs (Chart 3.6).83

83 The Headquarters comprises political and expert members. Political members include the Prime Minister, as Director-General of the Headquarters, all Cabinet Ministers, and ten expert members. The ten expert members are generally drawn from industry, law firms, and academia.

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Table 3.19 Principal legislation relating to IPRs

Last Legislation First passed amended Patent Act 1959 2014 Utility Model Act 1959 2014 Designs Act 1959 2014 Trademark Act 1959 2014 Copyright Act 1970 2014 Law on the Circuit Layout of Semiconductor Integrated Circuits 1985 2014 Plant Variety Protection and Seed Act 1998 2007 Unfair Competition Prevention Act 1993 2012 Law on Exceptional Provisions for the Registration of Program Works 1986 2009 Law on Management Business of Copyright and Neighbouring Rights 2000 2008 Act on Special Provisions for Procedures Related to Industrial Property Right 1990 2014 Patent Attorney Act 2000 2007 Intellectual Property Basic Act 2002 2003 Act on International Applications under the Patent Cooperation Treaty 1978 2014 Law Concerning the Exceptional Provisions to the Copyright Act, required as 1956 2000 a consequence of the Enforcement of the Universal Copyright Convention

Note: There are also enforcement laws for several of these acts. Source: Information provided by the Japanese authorities.

Chart 3.6 Structure of IPR administration and enforcement

Cabinet Secretariat

Intellectual Property Strategy Headquarters

Ministry of Education, Ministry of Economy, Ministry of Agriculture, Ministry Culture, Sports, Trade and Industry Forestry and Fisheries of Finance Science and Technology (METI) (MAFF) (MOF) (MEXT)

Agency for Cultural Customs and Japan Patent Office (JPO) Food Industry Affairs Bureau Affairs Tariff Bureau

•Policy Planningand New Business and Coordination Department Japan Copyright Office Customs Clearance Intellectual Property Division •Trademark, and Division Administrative Affairs Department • Patent and Design Examination Department Plant Variety Protection Office Office of IPR (Physics, Optics, Social (PVP Office) Infrastructure and Design) • Patent Examination Department (Mechanical Technology) • Patent Examination Department (Chemistry, Life Science and Material Science) • Patent Examination Department (Electronic Technology) • Trial and Appeal Department

Source: WTO Secretariat on the basis of information provided by the Japanese authorities.

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3.130. On 7 June 2013, the IP Strategy Headquarters issued the Intellectual Property Policy Vision to address shortcomings within the current climate for development of intellectual property by improving registration of intellectual property both in Japan and abroad, the rights from registration, and the protection of those rights. The Vision notes progress made since the Intellectual Property Basic Act was passed in 2003 and outlines the measures that should be taken to continue improvements over the next twenty years around four pillars:

• building up a global intellectual property system for enhancing industrial competitiveness through continuing cooperative relationships with advanced countries and countries with emerging markets so that the Japanese IP system can become a standard. In addition enhancing assistance to Japanese companies to expand into these markets and attract human capital into Japan;

• provide support for enhancing intellectual property management by SMEs and venture companies by raising awareness of the importance of IP within SMEs and providing government support for IP activities and acquisition of rights for their use overseas;

• improving the environment for adjusting to the digital network society by developing platforms for content circulation for data and entertainment: "In order to stimulate the creation of new industries and to continue the development of culture, it is necessary to create a cycle of content reproduction and use by overcoming the conflicting interests of rights-holders and users, and by designing a flexible system that would promote new business creation";

• strengthening soft power focusing on the IP content industry through initiatives such as "cool Japan", improving consumption abroad of Japan cultural and entertainment products through an outbound approach (promotion and information abroad), an inbound approach (establish a cultural centre to draw human capital and technology into Japan), and protection from internal and external counterfeits, and pirated products.84

3.131. The IP Strategic Program 2013 identifies specific plans of action and provides concrete proposals for future work, including on standardization and cutting edge digital network.

3.132. Since it joined WIPO in 1975, Japan has acceded to 17 international intellectual property treaties administered by the WIPO; it is currently a member of seven committees.85 Japan also has an extensive network of bilateral treaties affecting intellectual property.86

3.3.5.2 Patents

3.133. The process to follow for patent applications is described in Chart 3.7. According to the authorities, the average time from "Requesting for Examination" to "Substantive Examination" (first action pendency) was approximately 11 months at the end of FY2013. The average time from "Requesting for Examination" to "Decision to Grant a Patent or Decision of Refusal" (total pendency) was approximately 30 months in FY2012. The designated period for applicants to submit "Written argument/Amendment" is 60 days (for domestic applicants) or three months (for foreign applicants) after "Notification of Reasons for Refusal". The average period between "Appeal against Decision of Refusal" and "Appeal Decision to Grant a Patent (or of Refusal)" is approximately 14 months. The average period between "Appeal for invalidation" and "Appeal decision of invalidation (or to maintain the Registration)" is approximately 9 months.

84 Intellectual Property Strategy Headquarters (2013). 85 See Table III.10 in WTO (2013). 86 See WIPO, http://www.wipo.int/wipolex/en/profile.jsp?code=JP.

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Chart 3.7 Flowchart for patent applications

Procedures for obtaining a Patent Right

Application (18 months after filing)

Publication of Within Formality Unexamined Application three years Examination

Request for No Request for Examination Examination

Substantive Deemed Examination Withdrawal

Notification of Reasons for Refusal

Written Argument /Amendment

Decision to Decision of Refusal Grant a Patent

Appeal against Decision of Refusal

Appeal Examination

(Patent Fee Payment) Appeal Appeal Registration Decision to Decision of Grant a Refusal Patent Publication of Patent Gazette

Appeal for Invalidation

Appeal Examination

Appeal Decision Appeal Decision of to Maintain the Invalidation Registration

Intellectual Property High Court

Supreme Court

Source: JPO online information. Viewed at: http://www.jpo.go.jp/tetuzuki_e/t_gaiyo_e/pa_right.htm .

3.134. Under the Industrial Competitiveness Enhancement Act of 2013, the cost of filing patent applications by an individual, a small- or medium-sized enterprise that has commenced business or been established less than ten years or a micro-enterprise, has been reduced, including examination requests, patent annuities (for the first to tenth year) for domestic applications as well as search fee, transmittal fee, and preliminary examination fee for PCT international applications in Japanese. Those companies filing PCT international applications in Japanese will have two-thirds of the international filing fee and handling fee reimbursed by the Japan Patent Office (JPO).87 The JPO list of fees for IP applications indicates a specific fee for a patent application in a foreign language.88

3.135. In 2014, the Patent Act was revised to provide relief measures so that applicants are entitled to extend certain periods required for filing, examination, and other procedures when they have compelling reasons, e.g. following disasters. These measures will also be applied to the same cases covered by the Utility Model Act, Design Act, Trademark Act, and Act on International

87 Uehara A. (2014). 88 JPO online information. Viewed at: http://www.jpo.go.jp/tetuzuki_e/ryoukin_e/ryokine.htm.

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Applications under the Patent Cooperation Treaty. In addition, the Act was revised to create a new system for submitting an opposition to a granted patent, so in order to achieve the stability of patent rights earlier.

3.136. Reducing pendency to around 14 months by FY2023 from 29.6 in 2012 remains an objective.89 In April 2014, the JPO released the Quality Policy on Patent Examination which outlines the fundamental principles of quality management in patent examination in order to grant high-quality patents.90 Based on this Quality Policy, the JPO is dedicated to achieving the fastest and highest quality examination in the world.

3.137. In order to reduce pendency and reinforce examination capacity, the JPO has increased the number of fixed-term patent examiners and established a more efficient and effective examination system by outsourcing preliminary prior art searches. According to the authorities, the JPO achieved its goal of 11-months for the first action pendency (the average pendency from requesting examination to the substantive examination) at the end of FY2013.

3.138. The number of applications for patents made to the JPO was 328,436 in 2013, compared with 342,796 in 2012 (Table 3.20). In 2013, applications originating from Japan represented the vast majority, but a significant proportion came mainly from the United States, Germany and the Republic of Korea. The number of patents granted has increased steadily reflecting work by the JPO to reduce patent pendency.

Table 3.20 Patent applications and patents granted, 2005-13

2005 2006 2007 2008 2009 2010 2011 2012 2013 Patent applications to JPO by origin Japan 367,960 347,060 333,498 330,110 295,315 290,081 287,580 287,013 271,731 Other 59,118 61,614 62,793 60,892 53,281 54,517 55,030 55,783 56,705

Patent applications originating from Japan to all patent offices Total applications origin 530,005 517,486 508,263 509,990 463,601 468,417 475,051 490,444 .. Japan Patents granted by JPO by origin Japan 111,088 126,804 145,040 151,765 164,459 187,237 197,594 224,917 225,571 Other 11,856 14,595 19,914 25,185 28,890 35,456 40,729 49,874 51,508

.. Not available. Source: Information provided by the Japanese authorities.

3.139. Japan participates in the Patent Prosecution Highway (PPH), whereby applicants may request that their applications determined to be patentable in the Office of Earlier Examination (OEE) undergo accelerated examination in the Office of Later Examination (OLE) based on simplified procedures. There is no fee for using this service.91

3.140. The government of Japan also supports SMEs on acquisition of IPRs through the following two initiatives: (i) support through consultations to SMEs about their overseas expansion at a support centre (e.g. IP comprehensive support counters); and (ii) support in terms of fees, subsidizing half the costs SMEs incur in filing foreign applications when they are planning to expand their business overseas, and reducing search fees by two-thirds where the PCT application is filed in Japanese by an individual, a small- or medium-sized enterprise that has commenced business or been established less than ten years or a micro-enterprise.

89 The examination period excludes cases where the JPO requests an applicant to respond to the second notification of reasons for refusal and other actions by submitting an amendment and other documents within a period stipulated under the law. 90 JPO Press Release (25 April 2014), JPO Releases "Quality Policy" on Patent Examination. Viewed at: http://www.jpo.go.jp/seido_e/s_gaiyou_e/patent_policy.htm . 91 The purpose of the PPH is to facilitate an applicant's acquisition of a patent at an early stage worldwide and to enhance the utilization of search and examination results between IP offices so as to reduce the burden of examination and enhance the quality of examination worldwide. The JPO proposed the PPH and enacted it with the United States in 2006 for the first time in the world. Since 2013, Japan has implemented PPH with countries such as Australia, Colombia, Indonesia, Malaysia, Poland and Thailand. As at 1 October 2014, 33 offices participate in the PPH.

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3.141. In 2014, the Japan IP High Court made the first decision on the standard essential patent case (Apple vs. Samsung). The Court used a new approach to address this issue after the United States made its decisions.92

3.3.5.3 Utility models (UMs)

3.142. Under the Utility Model Act, the process for registration of a utility model is similar to that of a patent but without the substantial examination of novelty and inventive step. A utility model application can be converted into a patent application within three years of filing the application. Applications for utility models, designs and trademarks must be made in Japanese.

3.143. In December 2013, the JPO changed the operation related to the description of the report of the utility model technical opinion. Now, when examiners do not cite a specific prior art, they explain in the report either that they could or could not conduct effective search because of clarity of claims. In 2014, under the revision of the Patent Act, and in line with the legal systems overseas, the Utility Model Act was to be revised to take relief measures so that applicants are entitled to extend certain periods required for filing and other procedures when they have compelling reasons, e.g. following disasters.

3.144. Nearly all applications for registration of utility models are accepted (Table 3.21). This is because for all the applications which have passed the formality check, as well as the check of the basic requirements, the registration of the utility model right is instituted without going through a substantive examination of novelty, inventive step, etc.

Table 3.21 Utility models applications and registrations, 2005-13

2005 2006 2007 2008 2009 2010 2011 2012 2013 UM applications to JPO by origin Japan 9,421 8,922 8,399 7,717 7,799 6,889 6,305 6,292 5,965 Other 1,966 2,043 1,916 1,735 1,708 1,790 1,679 1,820 1,657 UM registrations granted by JPO by origin Japan 8,462 8,523 8,160 7,187 7,361 6,756 5,998 6,221 5,738 Other 2,111 2,070 1,920 1,730 1,658 1,816 1,597 1,833 1,625

Source: Information provided by the Japanese authorities.

3.3.5.4 Designs

3.145. The JPO also deals with the examination and registration of design applications under the Designs Act. Japan is now preparing for acceding to the Geneva Act of the Hague Agreement Concerning the International Registration of Industrial Designs. In 2014, Japan's Design Act was revised to improve the provisions for simultaneously filing a design application with multiple offices overseas in one procedure based on the Geneva Act, so as to reduce the cost imposed on applicants.

3.146. Because of the recent difficult economic conditions, design applications have decreased but the level of registrations granted by JPO has increased (Table 3.22). Applicants are becoming more selective in filing applications, and more likely to file applications with high "registrability" in Japan, which causes the high level of acceptance.

Table 3.22 Design applications and registrations, 2005-13

2005 2006 2007 2008 2009 2010 2011 2012 2013 Design applications to JPO by origin Japan 35,746 33,094 32,202 29,621 27,674 28,083 26,658 27,934 26,407 Other 3,508 3,630 4,342 3,948 3,201 3,673 4,147 4,457 4,718 Design registrations granted by JPO by origin Japan 29,971 27,034 25,228 25,986 25,819 24,458 23,042 24,610 24,272 Other 2,662 2,655 3,061 3,396 2,993 2,980 3,232 3,739 4,016

Source: Information provided by the Japanese authorities.

92 Japan IP Court online information. Viewed at: http://www.ip.courts.go.jp/eng/vcms_if/25ne10043yosi.pdf.

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3.3.5.5 Trademarks

3.147. Protection under the Trademark Act is only available for registered trademarks, although some protection under the Unfair Competition Prevention Act is available for unregistered trademarks. In 2014, Japan's Trademark Act was revised in two respects. First, it was revised to expand the scope of protection by adding non-traditional trademarks such as "colour" and "sound" that are already being protected in some foreign countries. Secondly, the Act is revised to expand the scope of eligible entities that can register the regional collective trademarks by adding associations of commerce and industry, chambers of commerce and industry, and specified non-profit corporations.

3.148. In May 2014, the Trademark Act was revised to protect non-traditional marks (i.e. sound, motion, hologram, color per se, and position) already protected in Europe and the United States. This aims to support companies' diverse brand strategies. The revised Act is expected to come into effect in Spring 2015.

3.149. Chart 3.8 describes the procedure for registration of a trademark.

Chart 3.8 Procedure for registering a trademark

Trademark

Application for trademark registration

Decision to grant a trademark registration or trial decision to grant a trademark registration

1. A trademark right becomes effective upon registration of its establishment and the term is 10 Registration fee years from the date of registration payment form for 2. The payment of registration fee for registration of establishment. However, the registration of the of the establishment of a trademark right must be term may be renewed by making establishment of a made within 30 days from the date on which a an application for registration of trademark right copy of the decision or the trial decision to grant renewal. a trademark registration. If the registration fee is not paid during the period, the trademark application will be dismissed.

Trademark Certificate of trademark registration registration registerregister 3. The trademark right is registered on the trademark registration register and a "certification Trademark of trademark registration" is issued to the owner of Gazette trademark right.

Application for registration of 5. In order to renew the term of the trademark right, 4. When the establishment of renewal an application for registration of renewal with trademark right is registered, payment of registration fee must be made for 6 Trademark Gazette is issued. months before the expiration of the term. If an application for registration of renewal is not be filed by the date of expiration of the term, an application is allowed to be filed within 6 months Transfer / from the date of expiration of the term. However, change in addition to the payment of the registration fee, 6. If the trademark right is surcharge must be paid in this case. transferred or the indication of the owner is changed after the establishment has been registered, an application for registration of the transfer or change must be filed in order to register new information on the trademark registration register.

Source: JPO online information. Viewed at: http://www.jpo.go.jp/seido_e/s_gaiyou_e/registration_trademark.htm.

3.150. When a trademark application is filed, it takes approximately 4.3 months to send first notification including reasons for refusal. The period from the payment of registration fee to establishment of a trademark right to the registration of it on the Trademark Register is

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- 65 - approximately two weeks when the payment procedure is made via internet and around one month when it is made in paper form. The period from the establishment of a trademark right to the publication of the Trademark Gazette is around one month. The period from an application for registration of renewal of a trademark right to the registration of the renewal on the Trademark Register is about two weeks when the application is made via internet and about one month when it is made in paper form. It takes 10 days to register a transfer of a trademark right from a former holder to a new holder or a change of the name or the address of a holder on the Trademark Register.

3.151. In 2013, the number of trademark applications and registrations reached 117,674 and 103,399, respectively (Table 3.23).

Table 3.23 Trademark applications and registrations, 2005-13

2005 2006 2007 2008 2009 2010 2011 2012 2013 Trademark applications by origin Japan 114,015 111,754 118,155 95,674 90,474 92,163 84,673 95,548 92,495 Other 21,761 24,023 25,066 23,511 20,367 21,356 23,387 23,462 25,179 Trademark registrations by origin Japan 80,962 88,411 79,836 82,469 88,449 79,338 70,800 77,129 82,736 Other 13,477 15,024 16,695 17,774 20,268 18,442 18,479 19,231 20,663

Source: Information provided by the Japanese authorities.

3.3.5.6 Geographical indications (GIs)

3.152. GIs are protected under the Trademarks Act and the Unfair Competition Prevention Act. Additional protection for GIs for wines and spirits, pursuant to Article 23 of the TRIPS Agreement, and for sake, is administered by the National Tax Agency and available under the Law Concerning Liquor Business Association and Measures for Securing Revenue from Liquor Tax through its Labelling Standard Concerning Geographical Indications.

3.153. Japan has no GI registration system. The Commissioner of the National Tax Agency designates places where wines, spirits, and sake are produced if the GI fulfils the fundamental principle, i.e. that the wines and spirits possess specific characteristics in quality or good reputation and place. So far, six GIs have been designated for Japanese liquors, including Iki, Kuma, Ryukyu, Satsuma (spirits), Hakusan (sake) and Yamanashi (wine). The abuse of GIs is dealt with in court, based on the Unfair Competition Prevention Act, on a case-by-case basis.

3.154. In June 2014, the Act for Protection of Names of Designated Agricultural, Forestry and Fishery Products and Foodstuffs was promulgated. The aim is to protect GIs of agricultural products, secure the interest of producers of such products and thereby contribute to the development of the sector, and ensure the interest of consumers. This Act is to enter into force by June 2015.

3.3.5.7 Copyright

3.155. In 2012, the Copyright Act was amended on the incidental use of copyright works to strengthen the protection against illegally downloading music or film files, including criminal penalties.93 In 2012, the Beijing Treaty on Audiovisual Performances was adopted to reinforce the protection of the performers' rights. To accede to the Beijing Treaty and to clarify that not only books published in paper but also electronic books are covered by the right of publication, the Copyright Act was amended in 2014. This amendment will enter into force in 2015.94

3.3.5.8 Enforcement

3.156. The annual Survey Report on Losses Caused by Counterfeiting for FY2013, continued to show substantial, though declining, losses among the 8,081 enterprises covered in the survey:

93 Copyright Research and Information Centre online information. Viewed at: http://www.cric.or.jp/english/index.html. 94 With the progress of digitization and networking, the number of electronic books and of pirated copies of published works which are illegally reproduced and uploaded on the internet has been increasing rapidly.

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- 66 - down from ¥125.5 billion in FY2011 to ¥100.1 billion in FY2012 affecting 21.8% of those surveyed.95 About two-thirds of those surveyed indicated that they had suffered losses in China with a fifth losing in Chinese Taipei.

3.157. The Intellectual Property High Court (IP High Court), a special branch within the Tokyo High Court, inter alia, hears suits against appeal/trial decisions made by the JPO, as the court of first instance, and civil cases relating to intellectual property as the court of second instance.96

3.158. In 2013, 353 suits against appeal/trial decisions made by the JPO were commenced (413 in 2010) and 429 were terminated (444 in 2010). In the same year, 114 intellectual property appeal cases were commenced (104 in 2010) and 99 were terminated (101 in 2010).

3.159. An individual or enterprise may seek to have imports and exports suspended on the grounds of infringement of the following IPRs: trademarks, copyright and related rights, patents, designs, utility models and PBRs, as well as on the grounds of violation of unfair competition law. The process toward such suspension is initiated upon request for suspension of imports and exports to the customs office or on ex-officio. In such cases, the customs official is responsible for determining whether there is such an infringement. For goods already imported or produced in Japan, a lawsuit through the courts of first instance is required or, if the parties agree, arbitration under the Arbitration Centre for Industrial Property. Appeals to decisions by the court of first instance shall be made to the IP High Court regarding cases on a patent right, utility model right, right of layout-designs of integrated circuits or an author's right over a computer programme throughout Japan, as well as other IP cases within the Tokyo High Court jurisdiction.

3.160. Border enforcement plays a pivotal role in preventing IPR-infringing goods from entering and exiting Japan. In FY2013, there were 28,135 cases of seizure/denial of entry at the border due to IPR infringement (against 23,280 in 2011), while the number of items seized or denied entry went from 728,000 in 2011 to 1.1 million in 2012 and 628,000 in 2013 (Table 3.24).

Table 3.24 Seizure of imports, 2009-13

Category Main items 2009 2010 2011 2012 2013 Products concerned ('000 units) Shoes Sports shoes 26 166 137 37 23 Accessories Necklaces, rings, charms 80 84 85 27 20 Clothing T-shirts, sweatshirts, jeans 112 45 77 94 82 Bags Handbags, purses 72 46 54 84 85 Medicine Medicine 85 40 53 390 43 Household utensils Thermos bottles, mirrors 28 22 40 3 8 Hats Hats, caps 23 37 29 11 14 Mobile phones and Mobile phones, and its coverage 15 11 28 63 90 equipment Clothing equipment Zippers 65 48 17 13 7 Computer accessories Computers 14 18 14 30 13 Other Accessories of bags, CDs, watches, key 524 114 194 367 243 cases, electronic appliances, etc. Total 1,044 631 728 1,118 628

Types of violation (cases) Patent rights 15 9 8 3 2 Utility model rights 0 0 0 0 0 Design rights 88 56 88 79 43 Trade mark rights 21,415 22,994 22,843 26,304 27,975 Copyright (related rights) 423 273 484 322 383 Plant breeders' rights 0 0 1 0 0 Unfair competition 19 1 3 2 19 Total 21,893 23,233 23,280 26,607 28,135

Source: Information provided by the Japanese authorities.

3.161. Japan Customs does not distinguish between seizures made following complaints and on an ex-officio basis in statistics. The same procedure is applied after determining whether IP rights are infringed or not.

95 METI (2014). 96 WTO (2013).

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3.162. Since 2002, Japan has concluded 13 economic partnership agreements (EPA) with its trading partners, mainly in Asia. Most of these EPAs have an IP section, the main purpose of which is to secure adequate, effective, non-discriminatory, and transparent IP protection and enforcement in trade. Moreover, Japan attaches great importance to IP enforcement in various multilateral cooperation fora, such as the WTO TRIPS Council, WIPO, APEC, and OECD.

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4 TRADE POLICIES IN SELECTED SECTORS

4.1 Agriculture

4.1. In 2012, agriculture contributed around 1.02% to GDP, which is about the same as in 2004 (Table 4.1), and 3.6% of total employment in 2013. Although agriculture is a relatively small part of the economy and employment it is important for historical and cultural reasons and, according to the authorities, for food security.

Table 4.1 Agriculture in the economy, 2004-12

2004 2005 2006 2007 2008 2009 2010 2011 2012 GDP total 503,725 503,903 506,687 512,975 501,209 471,139 482,384 471,311 473,784 (¥ billion) GDP agriculture 5,600 5,134 4,991 4,834 4,743 4,522 4,769 4,544 4,835 (¥ billion) Employment total 63.29 63.56 63.89 64.27 64.09 63.14 62.98 62.89 62.70 (million persons) Employment agriculture 2.64 2.54 2.50 2.52 2.47 2.44 2.37 2.31 2.24 (million persons)

Source: Statistical Year Books and authorities.

4.2. As a mountainous island nation, relatively little land in Japan is suitable for agriculture: out of a total land area of approximately 377,900 km2, 12% is cultivated and a further 0.9% is grassland.1 The area under cultivation has been declining for some years as land has been withdrawn from production, principally through "dilapidation artificially"2 which the authorities defined as "the land use transformation that cultivated land has been converted to other uses including construction work and abandonment."

4.3. There have been several changes to the legislation on land ownership since the major reforms of the late 1940s and the provisions of the Land Act of 1952 limiting land holdings to 3 ha were removed in 1970. However, farms remain small and holdings are often fragmented: in 2010 there were 2.5 million farm households with an average size of 1.3 ha often in several different parcels. Of the 2.5 million farm households, 1.6 million were classified as commercial farm households (defined as farms of at least 0.3 ha or annual sales of at least ¥500,000). Commercial farms may then be classified as: part-time and full-time; or as business, semi-business, or side-business. Even commercial farmers farms are usually small in size, although in Hokkaido the majority of the commercial farms are over 10 ha (Table 4.2).3

4.4. Several factors account for the small fragmented structure of farms and the relatively low degree of consolidation. The land reforms of the 1940s and the irrigation patterns and labour- intensive nature of rice farming meant that farms were quite productive during that period. However, mechanisation has greatly reduced labour requirements allowing part-time farming while many farmers are reluctant to rent or sell land for farming for social and cultural reasons as well as the opportunity to make large capital gains should the land be rezoned for construction. A high degree of government support and protection for farming has also meant that small-scale farming remains profitable, particularly when supplemented by non-farm incomes. However, the result has been a steadily aging farming population and an inefficient agricultural sector.4, 5

4.5. Gross output of agricultural products has been quite stable over the past ten years as, in general, domestic prices and national production have changed very little. Rice remains the most important single product but its production value is less than that of vegetables or livestock (Table 4.3). Rice accounts for about a quarter of gross output, with nearly half of commercial farm households specialized in rice production and well over half of cultivated land under rice production.

1 MIC (2014), Table 1-6. 2 MIC (2014), Table 7-8. 3 MAFF (2014). 4 Jones RS, Kimura S. (2013). 5 Godo Y., Takahashi D. (2012).

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Table 4.2 Farm households and average farm size, 2010-13

2010 2011 2012 2013 Farm households '000 2,538 ...... Of which Commercial farm households '000 1,631 1,561 1,504 1,455 Of which Full-time '000 451 439 423 415 Part-time '000 1,180 1,122 1,081 1,040 Commercial farm households '000 1,631 1,561 1,504 1,455 Of which Business farms '000 360 ...... Semi-business '000 389 ...... Side-business '000 883 ...... Ha cultivated land/household Commercial farm households Ha 1.96 2.02 2.07 2.12 Business farm household Ha 4.88 5.05 5.18 5.38

.. Not available. Note: Definitions: Farm household: operates farming with 10 ares or more of cultivated land or sales of agricultural products of ¥150,000 and over in the previous year. Commercial farm household: cultivated land under management of 30 ares and over or with annual sales of agricultural products amounting to ¥500,000 and over in the previous year. Business farm household: commercial farm household where the percentage of agricultural income is more than 50% of the household income, with one and more family members engaged in own farming for 60 days and longer, and under 65 years old. Semi-business farm household: commercial farm household non-agricultural income is the majority of the household's income, one or more family members engaged in own farming for 60 days and longer, and under 65 years old. Side-business farm household: farm household with no member engaged in own farming for more than 60 days and under 65 years old. Full-time farm household: no household member engaged in jobs other than farming. Source: MAFF (2014), The 88th Statistical Yearbook of Ministry of Agriculture, Forestry and Fisheries (2012- 2013). Viewed at: http://www.maff.go.jp/e/tokei/kikaku/nenji_e/88nenji/index.html#nse001 [December 2014].

Table 4.3 Total agricultural production and production of selected products, 2003-12

Gross Crops Rice Vegetables Wheat Soya beans output ('000 ('000 ('000 ('000 (¥ bn) (¥ bn) (¥ bn) (¥ bn) (¥ bn) tonnes) tonnes) tonnes) tonnes) 2003 8,857 6,460 2,342 7,792 2,097 15.169 .. 856 .. 232 2004 8,714 6,183 1,991 8,730 2,143 14,540 .. 860 .. 163 2005 8,512 5,940 1,947 9,074 2,033 14,547 .. 875 .. 225 2006 8,332 5,818 1,815 8,556 2,051 14,324 .. 837 .. 229 2007 8,259 5,720 1,790 8,714 2,089 14,746 .. 910 .. 227 2008 8,466 5,820 1,901 8,823 2,111 14,622 .. 881 .. 262 2009 8,190 5,590 1,795 8,474 2,085 14,072 .. 674 .. 230 2010 8,121 5,513 1,552 8,483 2,249 13,365 .. 571 .. 223 2011 8,246 5,639 1,850 8,402 2,134 13,513 .. 746 .. 219 2012 8,525 5,879 2,029 8,523 2,190 13,799 ...... Beef Pig Livestock Beef Milk Pigs Hen eggs cattle meat ('000 ('000 ('000 ('000 (¥ bn) (¥ bn) (¥ bn) (¥ bn) (¥ bn) tonnes) tonnes) tonnes) tonnes) 2003 2,329 400 495 694 8,400 467 1,260 345 2,529 2004 2,458 446 512 688 8,329 519 1,272 387 2,491 2005 2,506 473 498 676 8,285 499 1,245 435 2,481 2006 2,453 478 496 649 8,138 498 1,247 401 2,488 2007 2,479 485 503 636 8,007 523 1,251 402 2,583 2008 2,585 459 519 660 7,982 579 1,249 450 2,554 2009 2,547 482 516 703 7,910 512 1,310 421 2,508 2010 2,553 464 514 675 7,720 529 1,292 442 2,515 2011 2,551 463 500 658 7,474 536 1,267 451 2,483 2012 2,588 503 518 687 7,630 537 1,297 420 2,507

.. Not available. Source: Statistical Year Books and authorities.

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4.1.1 Trade

4.6. Japan has a deficit in trade in agricultural goods with imports of over US$61.4 billion and exports of US$3.4 billion in 2013.6 In current U.S. dollar value terms, both imports and exports have increased over the past ten years, but are down compared to their 2011 and 2012 peaks (Chart 4.1).

Chart 4.1 Trade in agriculture, 2004-13 (US$ billion and %)

100 10%

90 9%

80 8%

70 7%

60 6%

50 5%

40 4%

30 3%

20 2%

10 1%

0 0% 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Exports of agricultural products (US$ billion) Imports of agricultural products (US$ billion) Exports of agricultural products as a % of total exports Imports of agricultural products as a % of total imports

Source: UNSD Comtrade database.

4.7. Imports of agricultural products are widely spread across many different tariff lines with the top ten products representing less than 50% of total agricultural imports. Although imports in 2013 were lower than the previous two years they were still about 50% higher than in 2006 (in current U.S. dollar terms). Several of the main imported tariff lines are cereals and oilseeds, a significant proportion of which is for processing into food and animal feedstuffs (Table 4.4).

4.8. Exports of agricultural products from Japan tend to be of processed products. Although the overall value of exports has grown over the past few years, performance has been mixed among different tariff lines; for example exports of cigars and cigarettes have been stable in value while declining in volume while exports of bakers' wares and other fermented beverages have increased in both volume and value (Table 4.5).

Table 4.4 Imports of agricultural products, 2006-13

HS2002 – Products 2006 2007 2008 2009 2010 2011 2012 2013 Total US$ million 41,798 45,852 55,757 48,098 53,203 66,746 66,164 61,383 1005 - Maize '000 tonnes 16,883 16,628 16,460 16,294 16,188 15,285 14,895 14,401 US$ million 2,586 3,843 5,578 3,770 3,956 5,355 5,127 4,750 2402 - Cigars, … and cigarettes '000 tonnes 99 92 86 85 78 90 83 80 US$ million 3,190 2,989 3,169 3,503 3,511 5,777 5,367 4,103 0203 - Meat of swine, fresh, chilled '000 tonnes 725 761 818 703 753 793 779 738 or frozen US$ million 3,299 3,435 4,164 3,949 4,511 5,225 5,122 3,996 1602 - Other prepared or '000 tonnes 534 535 482 503 554 612 656 654 preserved meat, meat offal or US$ million 1,753 1,804 1,930 2,024 2,291 2,855 3,126 2,960 blood 1001 - Wheat and meslin '000 tonnes 5,337 5,275 5,781 4,703 5,476 6,214 5,970 6,200 US$ million 1,280 1,635 3,277 1,448 1,668 2,710 2,156 2,278

6 For the purposes of this section of the Trade Policy Report, the definition of agricultural product used is that set out in Annex 1 of the Agreement on Agriculture where fish and fish products are taken to include HS2002 Headings 020840, 03, 051191, 1504, 1603, 1604, 1605, and 230120.

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HS2002 – Products 2006 2007 2008 2009 2010 2011 2012 2013 1201 - Soya beans '000 tonnes 4,042 4,161 3,711 3,390 3,456 2,831 2,727 2,762 US$ million 1,282 1,663 2,364 1,750 1,834 1,812 1,811 1,883 1205 - Rape or colza seeds '000 tonnes 2,293 2,154 2,313 2,072 2,344 2,319 2,408 2,461 US$ million 717 957 1,570 946 1,164 1,541 1,658 1,682 0901 – Coffee '000 tonnes 428 396 394 397 417 423 387 464 US$ million 1,022 1,067 1,267 1,153 1,406 2,059 1,700 1,586 2204 - Wine of fresh grapes '000 tonnes 173 174 180 188 201 215 .. 463 US$ million 1,173 1,253 1,331 1,079 1,173 1,331 1,575 1,582 0201 - Meat of bovine animals, '000 tonnes 223 216 199 213 211 213 212 212 fresh or chilled US$ million 1,267 1,281 1,248 1,157 1,285 1,454 1,515 1,455 0202 - Meat of bovine animals, '000 tonnes 237 258 259 268 288 304 302 322 frozen US$ million 675 767 895 839 1,004 1,190 1,245 1,275

Source: UNSD Comtrade.

Table 4.5 Exports of agricultural products, 2006-13

HS2002 - Products 2006 2007 2008 2009 2010 2011 2012 2013 Total US$ million 2,226 2,480 2,929 2,999 3,480 3,552 3,512 3,355 2106 - Food preparations '000 tonnes 21 24 25 23 23 22 22 22 n.e.s. US$ million 234 258 303 333 365 376 363 336 2103 - Sauces and '000 tonnes 69 72 70 69 72 70 69 74 preparations US$ million 205 214 239 273 313 326 317 289 2402 - Cigars, … and '000 tonnes 17 17 18 16 16 16 14 13 cigarettes US$ million 227 249 260 274 297 323 300 228 1905 - Bread, pastry, … '000 tonnes 17 20 20 16 18 16 18 22 other bakers' wares US$ million 114 133 161 153 183 180 208 218 2202 - Waters with added '000 tonnes 29 34 43 42 48 43 .. 132 sugar US$ million 59 70 105 108 136 128 151 127 4103 - Other raw hides and '000 tonnes 64 65 67 71 69 69 70 71 skins US$ million 65 66 103 65 69 113 122 125 1209 - Seeds, fruit, spores, '000 tonnes 2 2 2 1 2 1 1 1 for sowing US$ million 98 99 104 108 123 137 117 119 2206 - Other fermented '000 tonnes 11 12 13 13 15 16 .. 77 beverages US$ million 55 63 77 81 101 116 117 112 602 - Other live plants, '000 tonnes 9 21 .. 13 ...... cuttings, and slips US$ million 23 46 54 51 74 87 105 100 2208 - Alcohol of strength '000 tonnes 8 8 7 9 9 8 .. .. less than 80% vol. US$ million 39 45 53 53 62 72 84 88

.. Not available. Source: UNSD Comtrade.

4.1.2 Agricultural policies

4.1.2.1 Legal and institutional framework

4.9. The Ministry of Agriculture, Forestry and Fisheries (MAFF) is responsible for agricultural policy. The Ministry includes several divisions which deal with all aspects of agriculture (as well as forestry and fishing), including trade policy and trade negotiations relating to agricultural products, administering tariff quotas, statistics, domestic market supervision, agricultural insurance, and SPS and TBT measures relating to agriculture, and overseeing and promoting research and development undertaken under the Agriculture, Forestry and Fisheries Research Council.7

4.10. In 2013, the government established the Headquarters on Creating Dynamism through Agriculture, Forestry and Fishery Industries and Local Communities which is chaired by the Prime Minister and includes government Ministers. In December 2013, the Headquarters approved the Plan to Create Dynamism through Agriculture, Forestry and Fisheries and Local Communities.

4.11. Agricultural policy is set out in the Food, Agriculture and Rural Areas Basic Plan which is reviewed roughly every five years. The review of the current Plan started in December 2013 and sets out the objectives of doubling incomes in agriculture and rural areas over the next ten years

7 MAFF online information. Viewed at: http://www.maff.go.jp/j/policy/index.html [December 2014] (Japanese).

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- 72 - by increasing demand (both domestic and in export markets), improving value chains, reducing costs, promoting structural reform and improving productivity.8

4.12. Current policy is based on the current Basic Plan for Food, Agriculture, and Rural Areas of March 2010 and set out in detail in the Plan to Create Dynamism through Agriculture, Forestry and Fishery Industries and Local Communities. One of the main features of the plans is the concept of "Sixth Industrialization" which aims to improve vertical integration of agriculture from production and processing to retail, including related services.9

4.13. Agricultural policy continues to emphasise self-sufficiency, and the Basic Plan sets self-sufficiency targets for FY2020 of 50% on a calorie basis and 70% on a production value basis. The Action Plan also emphasises the importance of protecting infrastructure from natural disasters and nuclear accidents, and sets out several objectives to improve the viability of the agricultural sector and productivity including:

• Using increased farmer retirement due to the large proportion of farmers over 65 as an opportunity to increase the size of farms by encouraging land transfers to younger core farmers, promoting community-based farming co-operatives, and taking measures to reduce fragmentation;

• Enhancing the role of agricultural co-operatives in supplying inputs at lower prices and increasing purchases from farms and agricultural committees to resolve issues related to unused farmland;

• Attracting younger people into agriculture through support, encouragement to set up farm businesses, and education and training;

• Improving value added through higher quality production, and closer links to processers and consumers;

• Rebuilding exports after the 2011 earthquake, tsunami, and nuclear power plant accident as well as promotion abroad and introducing a system for protecting geographical indications; and

• Providing a social safety-net for agricultural producers.

4.14. There are many laws affecting farming generally and specific types of farming. Some of the principal laws include:

• The Food, Agriculture and Rural Areas Basic Act of 1999, last amended in 2009, which obliges the government to establish a basic plan for food, agriculture, and rural areas setting out national policies and objectives;

• The Agricultural Co-operatives Act of 1947, last amended in 2004, which provides exemptions from competition laws for agricultural co-operatives and sets out the services they may provide to their members. These services include supplying farm inputs, purchasing outputs, insurance, welfare, lending and savings, educational facilities, and a range of other activities;

• The Agricultural Land Act of 1951, last amended in 2009, which states that farm land cannot be sold or leased unless the local agricultural committee approves, nor can it be diverted to other uses without the approval of the governor of the prefecture. The 2009 amendment aims to facilitate the efficient use of land by allowing companies to lease

8 Statement by the Minister of Agriculture, Forestry and Food of 10 December 2013, MAFF online information. Viewed at: http://www.maff.go.jp/j/keikaku/k_aratana/pdf/daijindanwa.pdf [December 2014] (Japanese). 9 The term "sixth industry" is derived by multiplying the industrial sectors as follows. First (primary) × second (secondary) × third (tertiary) to come up with the "sixth industry". The sixth industry is expected to synergistically create new added-value through effective use of agricultural, forestry and fishery products, as well as land, water and other resources in farming, mountain and fishing villages, by integrating production, processing and distribution activities (MAFF (2011b)).

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farmland. In the first five years following the amendment, 1,576 firms entered agriculture; and

• The Act on Dairy and Beef Cattle Production Promotion of 1954, last amended in 2011, which obliges the government to establish as basic policy the modernization of dairy and beef cattle production.

4.15. Agricultural policy in Japan uses a comprehensive set of policy measures which result in a relatively high level of protection and support to producers for most products, with the exception of export subsidies which Japan does not have the right to use under its WTO commitments.

4.16. Programmes to encourage production limitation applies to rice which provide support through direct payments based on the amount produced within quotas and include a diversion programme for rice which is intended to encourage farmers to switch land from rice production to other crops. The Japan Dairy Council also administers voluntary production restriction programmes for milk. Farmers are not obliged to participate in these programmes, but most do so. Producer-price stabilization policies apply to beef calves, pork, fruits, vegetables and some other products which partially or fully compensate for differences between sales and target prices or historical average prices. In addition, the government subsidizes the Agricultural Insurance Scheme and provides reinsurance to local insurance funds.

4.1.2.2 Trade policies

4.17. In general, tariffs on agricultural products (WTO definition), with an average of 14.9%, are higher than tariffs on other products, with an average of 3.7%. Furthermore, the standard deviation of 26.5 for tariffs on agricultural products indicates that tariffs vary considerably among agricultural products with over one-quarter duty free and a maximum tariff (ad valorem equivalent) of nearly 300%. In addition, 17.4% of agricultural tariff lines are non-ad valorem (section 3.1.4.1).

4.18. Japan reserved the right to use the special agricultural safeguard (SSG) on 121 tariff lines. During the three years FY2011 to FY2013, Japan has applied either the volume or price-based SSG a number of times to out-of-quota imports of a variety of products (Table A4.1). These tariff lines include food preparations the prices of which would be expected to vary from one consignment to another more than prices for basic commodities. Therefore, it is not surprising to see the price- based SSG used several times a year on some of these tariff lines.

4.19. In its most recent notification on imports under tariff quotas (for FY2012) to the WTO Committee on Agriculture, Japan has 18 tariff quotas covering 196 tariff lines at the 9 digit level.10 Fill rates for each quota have been fairly consistent over the past few years but vary considerably from one quota to another. For example, the fill rates for "Other dairy products for general use", "barley and its processed products", "wheat … and its processed products", "evaporated milk" and some others were over 90% for each year from FY2007 to FY2012 but fill rates for other quotas, such as "skimmed milk", "prepared whey (for infant formula)", "butter and butter oil", and some others were consistently below 40%.

4.20. The method of administering the quotas varies from one quota to another, although the competent authority for all but one quota is MAFF (the exception being "designated dairy products for general use" where the competent authority is the Agriculture Livestock Industries Corporation, a state-trading enterprise). One quota ("prepared edible fat") is partially allocated to a supplying country. Under all methods, the applicant for an allocation must meet criteria such as end-use requirements, a record as an importer, planned usage, etc.11

4.21. Under the simultaneous buy and sell (SBS) systems for rice and wheat, an importer and a domestic user make a joint bid to MAFF specifying the government purchase price from the

10 WTO document G/AG/N/JPN/196 of 1 October 2014. 11 WTO documents G/AG/N/JPN/1 of 22 May 1995, JPN/1/ADD.1 of 27 June 2001, JPN/8 of 28 June 1996, JPN/8/CORR.1 of 17 October 1997, JPN/8/ADD.1 of 27 June 2001, JPN/23 of 17 October 1997, JPN/23/ADD.1 of 14 September 2000, JPN/23/ADD.2 of 27 June 2001, JPN/42 of 22 September 1999, JPN/57 of 14 September 2000, JPN/57/ADD.1 of 27 June 2001, JPN/81 of 6 June 2003, JPN/91 of 10 March 2004, JPN/100 of 13 September 2004, JPN/133 of 31 March 2008, and JPN/143 of 26 February 2009.

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- 74 - importer and government sale price on the domestic Japanese market. MAFF collects the difference in the prices (Table 4.6).

Table 4.6 Imports under the SBS system, FY2009-11 ('000 tonnes) 2009 2010 2011 Rice 100 40 100 Wheat 480 430 830

Source: Japanese authorities.

4.22. Japan did not reserve the right to use export subsidies and has notified the WTO Committee on Agriculture that it has not used any.12 Export credits, guarantees, and insurance from NEXI are available for agricultural products in the same way as exports of other goods.

4.23. According to the authorities, Japan makes an annual commitment of food assistance and provides funds for purchasing products. Recipient countries purchased 168,296 tons of rice and 231,443 tons of other products using these funds in 2009.

4.24. In August 2013, MAFF developed the Strategy to Promote Agriculture, Forestry, Fisheries Products and Foods. The Strategy sets the export target of major products and countries of ¥1 trillion. In June 2014, the Cabinet adopted the Japan Revitalization Strategy, which includes this export promotion strategy.13

4.1.2.3 Domestic support

4.25. Domestic support policies for agriculture in Japan have been evolving for some time although there has been little change in market access measures (tariffs, the special safeguard, and tariff quotas) since the implementation of the results of the Uruguay Round. The relatively high tariffs have helped to maintain domestic prices higher than world prices. Most other forms of market price support have been removed and administered prices now apply to a limited number of products (pig meat, beef, and calves). Participation in other programmes intended to contain production of rice and milk is not obligatory, but little production in excess of limits takes place (see below).

4.1.2.3.1 General support programmes

4.26. Domestic support programmes within Japan apply at both the general and product levels. At the general level support is provided for infrastructure, through extension services, and for insurance/disaster relief programmes as well as payments for conversion from rice production.

4.27. Several new programmes have been introduced to encourage structural reform, including:

• Municipalities are required to prepare master plans for agriculture to identify core farmers and an optimal pattern of land use for the municipal district;

• Legislation has been passed to establish a regional government-supported institution to promote farmland consolidation in each prefecture with a total budget of ¥70.5 billion. The prefectural institutions rent farmland, improve infrastructure if necessary, and lease the land to core farmers;

• Setting-up of Young Farmers Payments provide income support of ¥1.5 million per year and up to two years training. The income support payments may be for up to five years from the start of operating as a farmer. An eligible farmer must be identified in the municipality's plan, be under 45, have an annual income of less than ¥2.5 million, and have a viable production plan. The production plan is reviewed for viability by the prefecture or municipality.

12 For examples see WTO documents G/AG/N/JPN/194 of 25 April 2014, JPN/185 of 25 April 2013, JPN/176 of 1 May 2012, JPN/164 of 3 May 2011. 13 Viewed at: http://www.kantei.go.jp/jp/singi/keizaisaisei/pdf/honbunEN.pdf [October 2014].

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4.28. In addition, farmers that increase farm size are eligible to receive payments of ¥20,000 for each additional 0.1 ha, and payments of up to ¥700,000 per household are available for leasing land to farmers.14

4.29. The Agricultural Disaster Compensation Act provides the legal basis for the Agricultural Disaster Compensation Programme to provide compensation from losses caused by disasters, diseases, and other events. The current Agricultural Insurance Scheme is supported by the government and usually operated by the Agricultural Mutual Relief Associations run by farmers. As a general rule, the government contributes about 50% of the premiums. Insurance is mandatory for rice, wheat, and barley, and optional for livestock, fruit production, field crops, silk worms, and greenhouses.15

4.30. Starting in 2011, a new scheme, Direct Payment for Environmentally Friendly Farming, was implemented which replaced an earlier scheme of the same name which had operated since 2007. The new scheme extended the objectives and requirements for qualifying for the payments to address global warming and biodiversity. In FY2013, a total area of 51,114 ha received an average payment of ¥60,295 per ha. In FY2012, 216,000 farmers were certified as eco-farmers and qualified for Direct Payments for Environmentally Friendly Farming.16

4.31. In FY2000, a direct payment programme for farmers in hilly and mountainous areas was introduced to encourage farmers to continue production, and address environmental concerns relating to abandonment such as flooding, erosion, and stability of hillsides. Payment rates depend on the slope of the land and the type of production from ¥21,000 per 0.1 ha for paddy fields in high inclination areas to ¥1,500 per 0.1 ha for pasture. In FY2008, the scheme covered 665,000 ha and 641,751 participants.17, 18

4.32. In FY2011, the scheme for direct payments to farmers in hilly and mountainous areas was extended to cover flat farming areas on isolated islands and other disadvantaged areas.

4.1.2.3.2 Rice

4.33. Under the production adjustment programme, production quotas are assigned to each prefecture and each individual farmer based on MAFF estimates of supply and demand. The production quotas can be met with less land than had been used for rice cultivation in the past, that is, some land may be diverted to other uses or taken out of production entirely. Although subsidies are available for land diverted to other crops, around 39% of land taken out of rice production is left idle.19

4.34. Following a 2010 pilot programme for rice, in 2011 Farm Income Support Payments for rice were implemented for farmers that participated in the production adjustment programme. There are two components to the Farm Income Support Payments for rice: the first is fixed at ¥15,000 per 0.1 ha planted with rice; the second is triggered whenever the producer price falls below the average for the three years 2006 to 2008.

4.35. In December 2013, the government determined a plan to phase out production quotas for rice by 2018 with the objective of giving farmers greater production flexibility. As part of the reform, the first component of the Farm Income Supports Payments (¥15,000 per 0.1 ha) would be halved in 2014 and abolished in the 2018 crop year while the second component was abolished in the 2014 crop year.

4.1.2.3.3 Other cereals, sugar beet and starch potatoes

4.36. Under the Act on Farm Income Stabilization, core farmers producing wheat, barley, and soya beans, sugar beet, and starch potatoes are eligible for payments based on area planted in the

14 OECD (2014a), p. 132. 15 MAFF online information. Viewed at: http://www.maff.go.jp/j/keiei/hoken/saigai_hosyo/ [June 2014] (Japanese). 16 MAFF (2013a). 17 Sakuyama T. (2006), Vol. 3, No. 1, pp. 27-57. 18 Saika Y. (2010). 19 OECD (2013b).

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- 76 - previous year and payments based on the quantity and quality of annual output (Table 4.7). They are also eligible for payments which compensate for up to 90% of any loss of income compared with the average annual income for the preceding five years, excluding the highest and lowest years. The income-related payments are provided from a fund to which the government contributes 75% and participating producers 25%.

Table 4.7 Payment rates for other cereals, sugar beet, and starch potatoes (¥ per unit) Product Payment rate Per unit Payments based on outputa Wheat 6,320 60 kg Two-row barley 5,130 50 kg Six-row barley 5,490 50 kg Naked barley 7,380 60 kg Soy beans 11,660 60 kg Sugar beet 7,260 tonne Starch potatoes 12,840 tonne Payments based on area 20,000 10 are a Actual allowances for payments based on output are determined by deducting payments based on area from payments based on output. Source: Japanese authorities.

4.1.2.3.4 Fruits and vegetables

4.37. Under the Basic Policy for Fruit Industry Promotion of 2010, which replaced the 2005 policy, a new insurance programme for production losses was introduced. The objectives of the Basic Policy include the emphasis on increasing domestic production, consumption, and processing of domestically produced fruits. Under the Basic Policy, payments are made to support the planned fruits production programme, and processing of fresh fruits when the market price has declined or is foreseen to decline. For vegetables, farmer price support payments are made based on the quantity of production of specific vegetables under contract, calculated as the difference between 90% of the average of past six years and the average of annual market prices. The share of national and sub-national payments depend on the vegetable or fruit.20

4.38. Targeted farmers are listed in a Fruits Production Restructuring Plan for each production area, based on the Plan of Fruit Industry Promotion of each prefecture. These farmers are also eligible for assistance to convert production to more valuable fruits (defined as profitable fruits or highly valued varieties), for on-farm improvements, and for a four-year period after replanting when incomes decline while the new fruit plants mature. Between 2009 and 2012, 3,083 ha under fruit production were converted to more valuable varieties with the objective being to increase this to 7,641 ha in 2014.

4.1.2.3.5 Tobacco

4.39. The state trading enterprise, Japan Tobacco, which is part-owned by the government (section 3.3.3), is required, under the Tobacco Business Act to enter into purchase contracts with tobacco growers. These contracts specify the area to be planted, the specific varieties of leaf tobacco and the prices by variety and grade. In deciding the total area and price for these contracts, Japan Tobacco is required to respect the opinions of the Leaf Tobacco Deliberative Council which includes representatives of tobacco growers and academics. Japan Tobacco has noted that: "production costs for domestically-grown leaf tobacco is higher than those of foreign- grown leaf tobacco to the extent that the purchasing price for the former (before re-drying) is approximately four times that of the latter (after re-drying)".21 It was reported that, for 2015, the total area would be set at 8,662 ha (down 2.7% on 2014) and grower prices set at

20 OECD (2013a), p. 3. 21 Japan Tobacco Inc. (2014), p. 151.

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¥1,920.1 per kg.22 In 2013, the unit import price for unmanufactured tobacco (HS2002 heading 2401) was US$6.77 per kg23 (about ¥661 per kg).

4.40. Government policy also affects sales of the processed products. Although tobacco products are subject to excise duties, some brands, all owned by Japan Tobacco, are subject to lower rates (section 3.3.1.6). Furthermore, importers, wholesalers, and retailers of cigarettes are required to register with the Minister of Finance who must approve final retail prices.24

4.1.2.3.6 Livestock products

4.41. Most livestock in Japan, apart from in Hokkaido, are reared on feed. Grains imported as raw material for feedstuffs qualify for a reduced tariff subject to measures to ensure they are not diverted for human consumption. These measures include approval by the government for import by the processing plants, penalties for misuse of feed grains, and specified processing methods.

4.42. Administered prices apply to pig meat, beef, and calves (Table 4.8). For calves, ALIC implements a deficiency payment system which pays calf producers the difference between the guaranteed price and the actual average price. Should prices fall below the target rationalization price the difference between the local price and the target rationalization price is paid by a combination of ALIC, prefectural governments, and contributions from producers.

Table 4.8 Administered prices for calves, beef, and pig meat, FY2014 (¥) Product Guaranteed price Target rationalization price Japanese black calves 329,000 per calf 275,000 Japanese brown calves 300,000 per calf 253,000 Dairy breeds 128,000 per calf 87,000 Cross breeds 195,000 per calf 143,000 Upper stabilization price Standard stabilization price Beef 1,105,000 per tonne 850,000 Pig meat 570,000 per tonne 425,000

Source: Japanese authorities.

4.43. For beef producers, when prices fall below the standard stabilization price ALIC or other beef-related organizations may purchase and store beef which may be released whenever prices rise above the upper stabilization price. A similar scheme is used for pig meat.

4.44. Under the Price Stabilization Fund for Eggs payments are made to egg producers under contract, calculated as 90% of the difference between the baseline price (¥187/kg in FY2014) and the average trading price, multiplied by the quantity of eggs sold.25

4.45. The Feed Price Stabilization Programme operates to help to even out fluctuations in feed prices. Farmers pay ¥500 per tonne of concentrated feed into the fund operated by the milling industry. The fund is supplemented by the government and millers.26 When feed prices surge the millers can receive payments from the fund to limit price increases, such as in late 2012 and into 2013.27

4.1.2.3.7 Dairy

4.46. In addition to the administered prices for dairy calves going for beef production (Table 4.8), dairy producers also benefit from a number of support programmes.

22 Tobacco Reporter (2015). 23 UNSD Comtrade online database. Viewed at: http://comtrade.un.org/data/ [December 2014]. For 2013 imports were 55,464,244 kg and value of US$375,582,745. 24 Japan Tobacco Inc. (2014), p. 151. 25 OECD (2013a), p. 2. 26 USDA (2010). 27 USDA (2014).

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4.47. The Japan Dairy Council (JDC)28 operates a voluntary supply control system for liquid milk and a separate quota system for milk for processing. Compliance with the planned production system is voluntary, but only 5% of dairy producers operate outside the system. The annual production allowances determined by the JDC are based on its estimates of demand and are allocated to nine regional blocs each of which then sets production allowances for the cooperatives and dairy farmers within each bloc. To cushion producers against sudden price fluctuations, producers and the government contribute to the farm business stabilization fund (at rates which vary from one bloc to another but at a ratio of 1:3 respectively). The fund compensates producers of milk for processing whenever prices fall below the average for the previous three years.29 For milk going for cheese production producers are eligible for a subsidy of ¥15.1 per kg of milk (FY2013).

4.1.2.4 Support levels

4.1.2.4.1 WTO notifications

4.48. The most recent notification from Japan to the WTO Committee on Agriculture covers FY2010 to FY2012. According to the notifications, about two-thirds of all support for agriculture (support notified under the Green Box, Blue Box, and Amber Box (including de minimis) is in the Green Box and less than one-third under the Amber Box (including de minimis) (Chart 4.2).

Chart 4.2 Support notified to the WTO Committee on Agriculture, FY2003-12 (¥ billion) 2,500 de minimis Current Total AMS Blue Box Green Box

2,000

1,500

1,000

500

0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Source: WTO notifications.

Green Box

4.49. Total support notified under the Green Box has fluctuated considerably over the past few years from ¥1,522.9 billion in FY2010 to ¥2,094.2 billion in 2004, with a sharp increase in FY2011 attributed to reconstruction and rehabilitation following the earthquake. In FY2012, infrastructural services along with disaster rehabilitation made up nearly half of the total spending

28 The JDC was established in August 1962 at the behest of the Ministry of Agriculture, Forestry and Fisheries. In 1966, with the enactment of the Deficiency Payment Law, the Japan Dairy Council became a public service corporation. It is composed of prefectural-level associations, and overseen by national advisory organizations such as the Central Union of Agricultural Cooperatives and five other national federations of agricultural associations (JDC online information. Viewed at: http://www.dairy.co.jp/eng/eng15.html [December 2014]). 29 JDC online information. Viewed at: http://www.dairy.co.jp/eng/eng08.html [December 2014].

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- 79 - while direct payments under various headings (rice conversion programme and others under environmental programmes, payments on historical bases, and regional assistance) accounted for about a sixth, while expenses of government officials and official agricultural statistics accounted for another tenth of the total (Chart 4.3).

Chart 4.3 Green Box support, FY2003-12 (¥ billion)

2,500

2,000 Other

Extension, advisory, management 1,500 Loans, insurance

Statistics and government expenses 1,000

Direct payments (rice conversion, historical basis, regional assistance)

500 Infrastructure, disaster rehabilitation

0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Source: WTO notifications.

Blue Box

4.50. All spending notified under the Blue Box is for the rice income stabilisation programme. Changes in spending reflect changes in policy with a fall in FY2007-09 followed by sharp increase in FY2010 which then levelled off at over ¥150 billion for FY2011 and FY2012 (Chart 4.2).

Amber Box

4.51. After several years of decline, the trend for the total support in the Amber Box since 2007 (including de minimis) has been upwards. The lowest point in 2007 corresponded to the elimination of reference prices for several crops. Since then support for beef and veal, and pig meat plus non-product-specific support under the crop income stabilization payments have increased (Chart 4.4).

4.1.2.4.2 OECD indicators

4.52. The OECD has been publishing reviews of agricultural policies in Japan, other OECD countries, and some other economies for several years. In these publications, the value of transfers to agricultural producers is measured using the Producer Support Estimate (PSE) and associated indicators. The methodology for calculating these indicators is different from that used to calculate the Aggregate Measure of Support (AMS), and the two sets of data are neither compatible nor comparable. The total PSE is "The annual monetary value of gross transfers from consumers and taxpayers to agricultural producers, measured at the farm gate level, arising from policy measures that support agriculture, regardless of their nature, objectives or impacts on farm production or income. It includes market price support, budgetary payments and budget revenue foregone, i.e. gross transfers from consumers and taxpayers to agricultural producers arising from policy measures based on: current output, input use, area planted/animal numbers/receipts/incomes (current, non-current), and non-commodity criteria." Thus, the PSE includes estimates for the value of transfers provided by market access measures, such as tariffs

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- 80 - and tariff quotas, as well as input subsidies, direct payments to producers that are coupled to prices or production, and direct payments decoupled from prices and production.30

Chart 4.4 Amber Box support, FY2003-12 (¥ billion) 900

800

700 Non-product specific 600 Other product specific Wheat 500 Beef and veal

400 Pig meat

300

200

100

0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Source: WTO notifications.

4.53. Although both PSE and the Total Support Estimate (TSE) were lower in 2013 than their peak level in the mid-1990s they are still high relative to other OECD countries. Furthermore, market access measures, such as high tariffs, and production restraints on some products mean farm prices are more than twice border prices as measured by the Producer Nominal Protection Coefficient (Producer NPC). The high tariffs are also the main component of market price support which is, in turn, the main component of the PSE (Chart 4.5).

4.54. Single commodity transfers (SCTs) make up most of the support provided to agriculture and the rates of support vary considerably from one product to another but overall represent more than half of gross farm receipts (which includes the value of farm production plus non-market- price support payments). For most commodities, the SCT has increased over the past six years (Table 4.9).

4.55. Despite changes in agricultural programmes over the past few years, support and protection given to agriculture in Japan is high compared to other countries and it is provided by a comprehensive set of policies ranging from tariffs and other forms of market price support, to deficiency payments, payments related to production, and payments not linked to prices or production as well as general support such as research, and extension services. However, market price support is the main component and it, along with other transfers based on output and inputs, is categorized as one of the potentially most production and trade-distorting forms of support.31

30 OECD (2014a), p. 49. 31 OECD (2014a), p. 13.

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Chart 4.5 Value of production and support to agriculture, 2001-13 (¥ billion)

10,000 11000

10000 9,000 TSE total PSE total MPS total Value of production

9000 8,000

8000 7,000

7000 6,000 6000 5,000 5000 4,000 4000

3,000 3000

2,000 2000

1,000 1000

0 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Source: OECD Producer and Consumer Support Estimates database.

Table 4.9 Total producer support estimate and single commodity transfer values for selected commodities, 2004-13

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Producer support estimate ¥ billion 5,196 4,888 4,580 4,136 4,407 4,332 4,973 4,813 5,233 5,265 % gross farm receipts 56 54 52 47 48 49 55 51 55 56

Single commodity transfers Total 4,881 4,564 4,269 3,686 3,921 3,794 4,361 4,233 4,650 4,642

Rice SCT (¥ billion) 1,701 1,625 1,420 1,293 1,248 1,138 1,389 1,439 1,595 1,589 % of gross receipts 80 82 76 71 69 63 73 75 78 75 Wheat SCT (¥ billion) 105 104 100 27 27 28 28 37 37 37 % of gross receipts 83 83 79 43 43 42 48 52 44 48 Soya beans SCT (¥ billion) 28 26 26 8 6 7 7 25 24 23 % of gross receipts 51 50 45 15 13 16 19 47 50 46 Milk SCT (¥ billion) 382 366 341 202 329 387 359 362 443 435 % of gross receipts 56 57 54 32 49 55 54 54 65 64 Beef SCT (¥ billion) 132 131 127 130 132 135 150 179 175 248 % of gross receipts 30 29 28 28 29 29 32 36 34 43 Pork SCT (¥ billion) 303 294 293 315 388 353 342 342 361 301 % of gross receipts 61 62 62 63 70 72 67 66 68 58 Poultry meat SCT (¥ billion) 20 20 21 22 23 23 28 27 28 27 % of gross receipts 10 11 10 10 10 10 10 10 10 10

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2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Eggs SCT (¥ billion) 56 66 60 60 67 60 63 68 64 67 % of gross receipts 15 15 15 15 15 15 14 15 15 15 Selected fruits and vegetablesa SCT (¥ billion) 471 403 430 357 384 375 512 431 426 435 % of gross receipts 42 37 39 32 35 35 45 40 39 39 a Selected fruits and vegetables are apples, Chinese cabbage, cucumber, grapes, mandarins, pears, spinach, strawberries, and Welsh onions. Source: OECD Producer and Consumer Support Estimates database. Viewed at: http://www.oecd.org/tad/agricultural-policies/producerandconsumersupportestimatesdatabase.htm [October 2014], and WTO Secretariat estimates based on OECD data for selected fruits and vegetables.

4.2 Fisheries

4.2.1 Features

4.56. According to the Japan Fisheries Agency in MAFF, Japan has 4.47 million km2 of territorial waters (12 nm) plus the Exclusive Economic Zone (EEZ) (200 nm) which would give it the sixth largest EEZ in the world.32 This area includes some of the richest and most varied fishing grounds in the world. In 2012, Japan was the seventh biggest producer of capture fisheries and the eleventh of aquaculture in the world with a total catch of 4.8 million tonnes in 2011, valued at ¥1,421 billion.33 Total production has been declining for some time for several reasons including declines in some stocks34 – such as the significant decline of Pacific sardine catch in Japan's EEZ – and reduction of the far-seas fleets and limited access to the EEZs of other countries. Furthermore, the 2011 earthquake and tsunami severely damaged the fisheries sector and the subsequent accident at the Fukushima nuclear power plants raised concerns about food safety of fisheries' products. Total fisheries-related damage was estimated at ¥1.26 trillion35 and the prefectures worst affected accounted for 21% of total marine fisheries and aquaculture production in 2011.36

4.57. Japan is one of the biggest consumers of fish and seafood in the world with one of the highest consumption levels at 54 kg per capita in 2011, although this is considerably lower than the peak of over 70 kg per capita per year in the early 1990s.37 Despite the decline in consumption, production has declined further and Japan is now a major importer of fish and seafood products (Table 4.10 and Table 4.11).

4.58. Although Japan is one of the biggest producers and consumers of fishery products, the sector is small compared to the rest of the economy: in 2012 the contribution of fisheries to GDP was less than 0.2% and its contribution to employment was less than 0.3% (Table 4.10). However, it remains economically important for many coastal communities and socially and culturally for the whole country.

Table 4.10 Fish in the economy, 2005-13

2005 2006 2007 2008 2009 2010 2011 2012 2013 GDP total (¥ billion) 503,903 506,687 512,975 501,209 471,139 482,384 471,311 473,784 478,075 GDP fisheries (¥ billion) 831 806 850 789 771 735 726 752 .. Employment total 63.56 63.89 64.27 64.09 63.14 62.98 62.89 62.70 53.11 (million) Employment fisheries 0.23 0.22 0.21 0.23 0.20 0.18 0.18 0.16 0.15 (million)

.. Not available. Source: Statistical Year Books and authorities.

32 MAFF (2013b), p. 4. 33 MIC (2014), Table 7-47. 34 FAO (2011). 35 MAFF online information, The damages cause by the Great East Japan Earthquake and actions taken by Ministry of Agriculture, Forestry and Fisheries. Viewed at: http://www.maff.go.jp/e/quake/press_since_120605.html [December 2014]. 36 FAO (2012), p. 20. 37 FAOStat, Food Balance Sheets online database. Viewed at: http://faostat3.fao.org/faostat- gateway/go/to/download/FB/*/E [December 2014].

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Table 4.11 Fisheries production, 2004-12

Total Marine Inland Whaling Total Fisheries Culture Total Fisheries Culture Total Pelagic Offshore Coastal (000 tonnes) (Number) 2004 5,775 5,670 4,455 535 2,406 1,514 1,215 105 60 45 111 2005 5,765 5,669 4,457 548 2,444 1,465 1,212 96 54 42 121 2006 5,735 5,652 4,470 518 2,500 1,451 1,183 83 42 41 87 2007 5,720 5,639 4,397 506 2,604 1,287 1,242 81 39 42 103 2008 5,592 5,520 4,373 474 2,581 1,319 1,146 73 33 40 84 2009 5,432 5,349 4,147 443 2,411 1,293 1,202 83 42 41 89 2010 5,313 5,233 4,122 480 2,356 1,286 1,111 79 40 39 76 2011 4,766 4,693 3,824 431 2,264 1,129 869 73 34 39 61 2012 4,864 4,798 3,759 458 2,209 1,090 1,040 67 33 34 87 (¥ billion) 2004 1,603 1,500 1,066 169 396 500 434 103 51 52 0a 2005 1,600 1,498 1,059 162 388 509 439 102 50 52 0 2006 1,606 1,529 1,079 154 400 525 450 78 24 54 0 2007 1,653 1,576 1,127 ...... 449 77 23 55 0 2008 1,628 1,543 1,125 ...... 418 85 24 61 0 2009 1,470 1,381 972 ...... 409 89 26 62 0 2010 1,483 1,400 972 ...... 428 83 23 60 0 2011 1,419 1,327 940 ...... 387 92 20 72 0 2012 1,418 1,329 916 ...... 413 89 18 71 0

.. Not available. a Values for fisheries production are in billion yen but, according to the authorities, the value of whaling has been ¥200-400 million in recent years which rounding to the nearest billion gives zero. Source: Statistical Japan Yearbooks and authorities.

4.59. Marine fisheries account for most production in both value and volume terms. Marine aquaculture contributed around one-fifth of the marine production in volume terms in 2010 but suffered from the 2011 earthquake with total production reduced by nearly 22%. Inland fisheries are small compared to total production and catch has declined considerably over the past decade. However, even though the volume of production of inland aquaculture has also declined, its value has increased as production has focused on higher value products (Table 4.11).

4.60. For a number of reasons, FAO and OECD statistics differ between each other and with national data, although all three sources indicate similar trends. In terms of species landed in domestic ports, Japan's fisheries' production includes a wide variety, with skipjack and other species of tuna, pelagics (mackerel, herring, etc.), and shellfish and molluscs representing just over 20% each in value terms.

4.61. According to OECD data, the decline in the catch value (2.8% annual average decline 2005-11) is similar to the decline in the quantity caught (2.7% annual average decline 2005-12) (Table 4.12)38 indicating that unit prices have not changed much over the past few years.

4.62. OECD data do not include figures for whaling. According to FAO data, there has also been a decline in the quantity of aquatic mammals caught (Table 4.13).

4.63. The structure of the fishing fleet has followed the trend in capture, as has the number of people engaged in fisheries. However, the fishing fleet is still dominated by small vessels of less than 5 tonnes and the vast majority of the 89,000 fishing entities are individual management entities (Table 4.14). Of these management entities, approximately half are run by full-time fishermen, although most of the part-time fishermen earn most of their income from fisheries.

38 OECD (2013c). WTO Secretariat calculations.

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Table 4.12 Fisheries landings in Japan, 2005-12 ('000 tonnes, ¥ billion) Total landings Tuna Pellagics Shellfish, molluscs ('000 tonne) (¥ bn) ('000 tonne) (¥ bn) ('000 tonne) (¥ bn) ('000 tonne) (¥ bn) 2005 4,511 1,109 657 226 1,653 190 801 253 2006 4,511 1,103 597 225 1,745 196 717 231 2007 4,436 1,149 636 256 1,631 209 758 231 2008 4,416 1,149 572 256 1,691 221 762 211 2009 4,200 998 517 210 1,591 190 769 188 2010 4,172 994 558 207 1,560 204 740 190 2011 3,859 959 500 196 1,502 194 733 200 2012 3,729 .. 522 .. 1,472 .. 654 ..

.. Not available. Source: OECD (2013), OECD Review of Fisheries: Country Statistics 2013, OECD Publishing, http://dx.doi.org/10.1787/rev_fish_stat_en-2013-en.

Table 4.13 Aquatic mammals taken by Japan, 2005-12

Aquatic mammals 2005 2006 2007 2008 2009 2010 2011 2012 Blue-whales, fin-whales (number) 943 1,348 1,020 1,006 1,114 909 569 703 Miscellaneous aquatic mammals (tonne) 1,652 1,599 1,573 1,154 1,404 932 562 500 Sperm-whales, pilot-whales (number) 16,140 14,026 13,153 9,155 11,210 6,580 3,284 1,775

Source: FAO Fisheries' statistics database. Viewed at: http://www.fao.org/fishery/statistics/global-capture- production/query/en [December 2014].

Table 4.14 Structure of fisheries, 2004-12

Registered fishing craft Persons 5-10 10-30 30-100 100-200 Over Total tonnage engaged <5 tonnes tonnes tonnes tonnes tonnes 200 tonnes ('000 tonnes) ('000) (number) (number) (number) (number) (number) (number) 2004 231 282,430 18,524 10,721 729 611 855 1,304 2005 222 278,056 18,025 10,668 656 582 823 1,269 2006 212 273,593 17,802 10,512 614 559 762 1,226 2007 204 266,625 17,674 10,417 588 551 721 1,195 2008 222 259,987 17,370 10,309 558 529 703 1,168 2009 212 252,902 17,058 10,148 522 498 614 1,112 2010 203 247,629 16,811 10,063 503 477 591 1,087 2011 178 225,500 16,097 9,617 464 437 550 1,019 2012 174 226,926 15,956 9,710 463 433 564 1,017

Source: Statistical Yearbooks, and authorities.

4.64. According to the authorities, the number of registered fishing vessels exceeds the number of persons engaged in fishing for several reasons: one person may have several vessels for different fishing methods, such as one for aquaculture and another for marine capture; the definition of a person engaged in fishing is someone over 15 years old and engaged at sea in fishery works for more than 30 days per year, while someone who does not meet this definition may have one or more registered vessels; and the number of persons engaged in fishing in 2011 and 2012 does not include the three prefectures affected by the Great East Japan Earthquake of 2011.

4.2.2 Trade

4.65. Japan is one of the biggest importers of fisheries' products in the world, with imports of over US$15 billion, compared to exports of just under US$2 billion in 2013.39 Since 2005, imports have fluctuated from a low of US$13.2 billion in 2007 to a high of US$18.1 billion in 2012 while following a downward trend for quantities imported (Table 4.15). Exports have followed an upward trend although the value declined in 2011 compared to 2010 before increasing to a new maximum level of nearly US$2 billion in 2013 (Table 4.16).

39 For the purposes of this section of the Trade Policy Report, fish and fisheries products are taken to include HS2002 Headings 020840, 03, 051191, 1504, 1603, 1604, 1605, and 230120.

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Table 4.15 Imports of fish products, 2006-13 (US$ million and '000 tonnes) HS2002 2006 2007 2008 2009 2010 2011 2012 2013 Total US$ million 14,030 13,258 14,512 13,355 15,030 17,470 18,096 15,407

030613 - Shrimps & prawns, ... '000 tonnes 230 207 197 198 205 205 201 187 frozen US$ million 1,955 1,742 1,756 1,737 1,943 2,195 2,136 2,167 030420 - Fish fillets, frozen '000 tonnes 213 198 191 176 194 225 236 224 US$ million 1,371 1,325 1,533 1,499 1,523 2,080 2,198 1,869 030490 - Fish meat other than '000 tonnes 299 297 273 215 246 259 258 236 fillets, frozen US$ million 693 705 1,051 676 848 908 1,007 777 160520 - Shrimps & prawns, '000 tonnes 69 67 64 65 70 77 78 72 prepd/presvd US$ million 528 506 528 552 615 775 808 773 160419 - Prepd/presvd fish ... '000 tonnes 119 119 92 93 104 100 96 96 other US$ million 812 784 590 603 809 912 939 737 030379 - Fish, n.e.s., frozen '000 tonnes 220 231 247 224 209 203 207 166 US$ million 580 577 673 663 703 763 782 626 030799 - Molluscs & invertebrates '000 tonnes 68 68 65 56 59 74 78 92 … other US$ million 372 365 379 355 401 544 632 582 160590 - Molluscs & '000 tonnes 109 102 86 89 93 99 92 96 invertebrates, prepd/presvd … US$ million 499 451 422 426 484 631 583 533 other 030380 - Fish livers & roes, frozen '000 tonnes 55 50 53 46 47 50 54 46 US$ million 488 440 644 449 401 498 708 490 030192 - Live eels (anguilla spp.) '000 tonnes 20 21 16 12 15 10 5 5 US$ million 266 251 336 191 410 431 387 479

Source: UNSD Comtrade.

Table 4.16 Exports of fish products, 2006-13

HS2002 2006 2007 2008 2009 2010 2011 2012 2013 Total US$ million 1,414 1,667 1,649 1,592 1,953 1,871 1,823 1,982

160590 - Molluscs & invertebrates, '000 tonnes 6 7 6 7 7 7 7 8 prepd./presvd … other US$ million 289 358 334 357 494 494 451 461 030799 - Molluscs & invertebrates '000 tonnes 9 13 29 26 32 40 51 64 … other US$ million 37 72 89 81 166 233 322 454 030379 - Fish, n.e.s., frozen '000 tonnes 126 135 116 173 160 96 100 127 US$ million 118 135 122 165 168 133 146 151 030374 - Mackerel, frozen, excl. '000 tonnes 173 147 123 78 116 96 104 112 fillets US$ million 101 111 132 73 109 108 113 121 030420 - Fish fillets, frozen '000 tonnes 5 6 6 5 5 6 6 7 US$ million 52 67 73 74 85 100 99 90 030319 - Pacific salmon, frozen, '000 tonnes 66 57 45 55 64 22 21 32 excl. fillets US$ million 149 109 97 140 202 84 75 83 030343 - Skipjack/stripe-bellied '000 tonnes 52 54 55 21 59 45 27 41 bonito, frozen, excl. fillets US$ million 42 68 94 23 80 68 53 79 160420 - Prepared/presvd. fish '000 tonnes 10 11 11 8 8 8 8 9 other than whole/in pieces US$ million 64 72 84 75 84 84 83 76 030371 - Sardines, frozen, excl. '000 tonnes 2 4 1 1 2 13 23 55 fillets US$ million 2 3 1 1 2 9 18 42 030341 - Albacore/longfinned '000 tonnes 12 32 9 16 7 13 17 19 tunas, frozen, excl. fillets US$ million 28 61 23 41 17 36 55 42

Source: UNSD Comtrade.

4.2.3 Policy

4.66. Overall responsibility for national fisheries' policies lies with the Fisheries Agency in MAFF, while prefectural governments are responsible for local issues, such as management of local fisheries' resources. Regarding important policy decision-making, the Fisheries Policy Council (national level), the Regional Fisheries Coordination Committees (at regional level), and the Sea Area Coordination Committees (at prefectural level) are consulted for opinions depending on the nature of the issue.

4.67. The Fisheries Cooperative Associations (FCA) are private cooperative organizations established voluntarily by fishermen. The FCAs provide for sales of fish, purchases of equipment and inputs, credit and insurance services and give guidance to their members. MAFF or the local governments lead and supervise the FCAs as required by law.

4.68. The Fisheries Research Agency (FRA), an incorporated administrative agency, was established in 2001 as an independent body by incorporating nine National Fisheries Research

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Institutes. In 2003 it took over the duties of the Japan Marine Fishery Research Centre, and the Japan Sea-Farming Association, and, in 2006, the National Salmon Resources Centre. The FRA is responsible for research into many aspects of capture and aquaculture as well as monitoring fishing stocks. In 2009, following a request from the Fisheries Agency, it published "The Grand Design of Fisheries and Resources Management in Japan".40

4.69. The main laws concerning the fisheries sector are:

• Fisheries Law of 1949 (revised in 1962 and last amended in 2007) which sets out basic rights to fisheries and licensing requirements for individuals and management entities;

• Basic Law on the Fisheries Policy of 2001 (last amended in 2008) which provides for measures to ensure sustainable exploitation, stability of supply, protection of the marine environment, and the basis for amendments of related legislation;

• Fisheries Cooperative Association Law of 1948 (last amended in 2007) which sets out the legal framework for the Fisheries Cooperation Associations;

• Law to Ensure Sustainable Aquaculture Production of 1999 (last amended in 2005) which addresses environmental concerns associated with aquaculture;

• Act on the Exercise of the Sovereign Right for Fishery, etc. in the Exclusive Economic Zone of 1996 (last amended in 2001);

• Act on Preservation and Control of Living Marine Resources of 1996 (last amended in 2007) which sets out the legal basis for establishing the total allowable catch (TAC) and total allowable effort (TAE);

• Act on the Protection of Fishery Resources of 1951 (last amended in 2010) which provides for measures to protect marine resources, such as closure of fishing grounds, and catch and gear restrictions, as well as measures to address pollution.41, 42, 43

4.70. Policy for the fisheries sector is set out in the Basic Plan for Fisheries which was formulated in 2012 following earlier plans such as the Basic Fisheries Plan of 2002 that was further developed in 2007. The Basic Plan sets out multiple objectives for the sector and fishing communities, based on four axes:

• Reconstruction of damage caused by the Great East Japan Earthquake;

• Sustainable use of resources through resource management and sustainable aquaculture;

• Promotion of consumption based on foods' safety, quality, and promotion; and

• Improved safety and livelihood of fishing communities.44, 45

4.71. The average duty on imports of fish and fish products is 6.2% with a maximum rate of 15% and a standard deviation of 3.7 – which indicates that there is not much variation among tariffs. In addition, other market access measures apply to several species:

• For some tuna and tuna-like species, such as bluefin tuna, southern bluefin tuna and bigeye tuna, Japan has import control systems, including import approval and acknowledgements for imports which, according to the authorities, are in accordance with the conservation and management measures of some tuna regional fisheries

40 FRA (2009). 41 European Parliament (2013). 42 FAO (undated). 43 Japanese authorities. 44 MAFF (2013b). 45 Mizahara M. (2012).

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management organizations (RFMOs) such as the International Commission for the Conservation of Atlantic Tuna (ICCAT) and the Commission for the Conservation of Southern Bluefin Tuna (CCSBT); and

• Import quotas apply to several other species, including herring, cod, mackerel, sardines, and saury. According to the authorities, these measures complement its management of coastal fisheries' resources, including TACs which apply to some of these species.46

4.2.3.1 Reconstruction

4.72. The Great East Japan Earthquake and tsunami caused extensive damage to the fishery sector in Japan causing an estimated ¥1.25 trillion in damage to 28,612 vessels, and 319 ports, and including ¥133.5 billion in damage to aquaculture facilities and products. Under the Fisheries Recovery Master Plan, the objective is to complete the recovery of fishing port facilities by end-FY2015. Over 12,000 vessels had been recovered by end-FY2013 and considerable progress has been made in replacing or recovering processing and distribution and seedling production facilities. To address concerns about food safety following the Fukushima nuclear power plant accident, an extensive system for monitoring radiation levels in the relevant area was introduced, backed, if necessary, by voluntary or compulsory suspension of fishing operations, sales, and distribution.

4.2.3.2 Stock management

4.73. In 2012 the FRA assessed 52 species and 84 fishing stocks and estimated that resource levels were low for 35 stocks, medium for 34, and high for 15. Management of resources is based on several measures, including fishing rights and permits, as well as voluntary resource management supported by the government.

4.74. Fishery rights and permits for fishing may be granted as follows:

• Fishery rights granted by prefectural governors for coastal fishing based on the fishing ground plan which sets out the type of fishery, the fishing ground and other details. The rights include operation of large-scale set-net fishing, aquaculture in specified areas, and small-scale common fishing;

• The prefectural governors may grant permits for small- to medium-scale fishing based on prefectural regulations which must be approved by MAFF; and

• MAFF may grant permits for large-scale off-shore and distant-water fishing as well as specified fishing methods for certain species. The permits may be: (i) for some designated fisheries where the total number of vessels by tonnage class and each area of operation are specified in a 5-yearly (generally) notification made by the Minister; (ii) for some specified fisheries where the Ministers grants a permit each year; or (iii) for some activities and species where notification must be made to the Minister before the start of the operation period.47

4.75. TAC are set for seven species by the Fisheries Agency based on estimates of allowable biological catch and other factors and in consultation with different stakeholders.48 It has been noted that, in some cases, the TAC had been greater than the allowable biological catch and Japan has not introduced an explicit ban on discards.49 According to the authorities, efforts have been made to ensure that the TAC conforms to the allowable biological catch and individual quota systems have been introduced for three species, including Atlantic bluefin tuna and southern bluefin tuna.

46 Japanese authorities; and JETRO (2011), pp. 1-2. 47 MAFF (2013b), p. 27. 48 TACs are set for saury, Alaska pollack, horse mackerel, sardine, mackerel, Japanese common squid, and snow crab. 49 FRC (2008), p. 7 (Japanese). Translated and referred to in European Parliament (2013), p. 25.

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4.76. In 2011, a new resource-management framework for both capture and aquaculture was introduced under which the fishery organizations prepare and implement resource-management plans in line with the guidelines developed by the central government or prefectural authorities. As at end-March 2013, 1,705 resource-management plans had been prepared.

4.77. Several measures have been taken to prevent and deter illegal, unreported, and unregulated (IUU) fishing, through bilateral cooperation and information-sharing efforts, and through regional fisheries' management organizations, for example vessel-monit*oring systems and trade-related measures such as statistical document programmes and catch documentation systems.

4.2.3.3 International agreements

4.78. Japan is a member of a number of international and regional fishery organizations50 and has intergovernmental agreements with Australia, Canada, China, France, Kiribati, the Republic of Korea, Marshall Islands, Morocco, the Russian Federation, Solomon Islands, Senegal, and Tuvalu. The agreements with Australia, Canada, and France do not provide for access by Japanese fishing vessels and the agreements with China, the Republic of Korea, and the Russian Federation are mutual-access agreements allowing reciprocal access to each country's EEZ. In addition there are numerous private-sector-based agreements which provide for access to the waters of other countries and territories (Cabo Verde, Côte d'Ivoire, Equatorial Guinea, Fiji, Gabon, Gambia, Guinea, Guinea-Bissau, Madagascar, Mauritania, Mauritius, Micronesia, Mozambique, Nauru, Palau, Papua New Guinea, Sao Tome and Principe, Seychelles, Sierra Leone, St. Helena, and Tanzania).

4.2.3.4 Support for fisheries

4.79. According to the OECD: "General services account for nearly half of government financial transfers, of which construction of public infrastructure is the most significant." Cost reducing transfers represent only a small proportion of total support and "an interest subsidy is the major cost-reducing transfer in Japan" while "support for renewal of small fishing boats and equipment is provided to improve workers' safety at sea on family-owned coastal boats" (Table 4.17).51

Table 4.17 Government transfers to fishing, 2005-11 (¥ billion) 2005 2006 2007 2008 2009 2010 2011 Marine capture fisheries 238.4 227.2 214.4 207.7 201.4 149.0 153.0 Decommissioning of vessels and licences 1.7 1.5 1.5 1.4 1.6 1.2 0.5 Disaster relief payments ...... Cost-reducing transfers 1.2 0.4 0.4 0.3 0.3 2.4 1.1 General services 235.6 225.3 212.6 206.0 199.5 145.3 151.4 Aquaculture 0.4 1.8 1.4 1.3 1.1 0.9 0.9 Cost-reducing transfers ...... 0.2 0.1 General services 0.4 1.8 1.4 1.3 1.1 0.8 0.9 Marketing and processing 2.2 2.0 2.0 2.2 3.0 1.6 0.6 General services 2.2 2.0 2.0 2.2 3.0 1.6 0.6 Total 240.9 231.0 217.9 211.3 205.5 151.5 154.6

.. Not available. Source: OECD (2013), OECD Review of Fisheries: Country Statistics 2013, OECD Publishing, p. 235. Viewed at: http://dx.doi.org/10.1787/rev_fish_stat_en-2013-en [December 2014].

4.80. Supplementary budgets provided additional assistance in response to the 2011 earthquake. The FY2013 budget and supplementary budget provided a total of ¥48.4 billion in financial support to fishermen and cooperatives out of a total of ¥293.3 billion.52

50 Indian Ocean Tuna Commission (IOTC), Western and Central Pacific Fisheries Commission (WCPFC), Inter-American Tropical Tuna Commission (IATTC), International Commission for the Conservation of Atlantic Tuna (ICCAT), Commission for the Conservation of Southern Bluefin Tuna (CCSBT), General Fisheries Commission for the Mediterranean (GFCM), South East Atlantic Fishery Organization (SEAFO), Convention on the Conservation and Management of Pollock Resources in the Central Bering Sea (CCBSP), North Pacific Anadromous Fish Commission (NPAFC), Commission for the Conservation of Antarctic Marine Living Resources, and Northwest Atlantic Fisheries Organization (NAFO). 51 OECD (2013d), p. 319. 52 European Parliament (2013), p. 23.

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4.81. Supporting the resource management system referred to above, an income stabilization measure was introduced in FY2011, and a cost reduction measure introduced in FY2010. The income stabilization measure is intended to partially compensate for losses in income arising from compliance with a resource-management plan while the cost-reduction measure compensates for any increase above 115% of the average for the past two years in the price of crude oil or feed costs. The cost-reduction measure is half funded by the government and half by the fishermen.53

4.82. In addition, a tax exemption for fossil fuels is provided for some sectors, including agriculture and fishing, and the special-purpose tax on light oil (which is used for construction and maintenance of public roads) does not apply to non-road uses of light oils which includes fishing vessels.54 The authorities stated that other industrial activities, such as aquaculture, forestry, ceramics, and other railways are subject to the same treatment.

4.83. The Fisheries Modernization Fund Interest Subsidy and the Fund for the Measure to Recovery Fishery Resources were notified to the WTO Committee on Subsidies and Countervailing Measures. According to the notification, the Fisheries Modernization Fund provides an interest subsidy to financial organizations, including fisheries' cooperatives, "to advance equipments and modernize management of fisheries and related sectors." The total amount provided was ¥3.9 million in FY2013 and ¥4.6 million in FY2012. Under the Fund for the Measure to Recovery Fishery Resources, the government provides grants for comprehensive programmes implemented by non-governmental organizations. The subsidies are provided for sustainable management of fishery resources, promotion of stock enhancement and aquaculture, and conservation of the coastal environment. The total amount provided was ¥2,706 million in FY2013 and ¥3,071 million in FY2012.55

4.3 Energy

4.3.1 Features

4.84. Japan imports nearly all its basic energy requirements in the form of natural gas, crude oil, coal, and oil products. Domestic oil production, at 0.005 million bbl/day and reserves of about 44 million barrels are small compared to consumption of 4.7 million bbl/day.56 One of the main sources of energy used to be from nuclear plants, which accounted for over 15% of total energy supply and over 30% of total electricity production in 2005, but this declined sharply following the accident at the Fukushima nuclear plant in 2011 and the subsequent shut down of other nuclear power plants leading to greater imports of natural gas and a reduction in energy consumption (Table 4.18).57

4.85. Most energy imports are in the form of crude oil which is refined in Japan. Most of the refined products are consumed domestically for transport, commercial and public services, and residential use but some are exported. In 2013, total refinery capacity was 4.123 million bbl/day and refinery throughputs were 3.453 million, down from 4.645 million and 4.118 million respectively in 2003.58

53 MAFF (2011a), p. 4. 54 Martini R. (2012). 55 WTO document G/SCM/N/253/JPN/Suppl.1 of 17 March 2014. 56 U.S. Energy Information Administration online data. Viewed at: http://www.eia.gov/countries/data.cfm [December 2014]. 57 International Energy Agency online data. Viewed at: http://www.iea.org/statistics/ [November 2014]. 58 BP (2014).

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Table 4.18 Total primary energy supply, 2005-12 ('000 tonnes of oil equivalent (toe)) 2005 2006 2007 2008 2009 2010 2011 2012 Coal 110,046 111,433 116,363 113,572 101,273 115,116 107,531 112,178 Crude oil 215,701 207,722 211,644 202,602 185,411 185,314 181,067 183,087 Oil products 27,467 25,818 18,038 11,243 15,415 17,009 25,802 27,107 Natural gas 70,565 77,454 83,046 83,715 80,732 86,014 100,062 105,292 Nuclear 79,421 79,095 68,756 67,270 72,905 75,114 25,520 4,154 Hydro 6,576 7,527 6,365 6,575 6,613 7,070 7,155 6,492 Geothermal, solar, etc. 3,837 3,738 3,729 3,482 3,682 3,522 3,704 3,781 Biofuels and waste 6,807 6,928 7,170 6,821 6,381 9,647 10,116 10,191 Total 520,421 519,695 515,111 495,278 472,412 498,808 461,956 452,281

Source: International Energy Agency online database. Viewed at: http://www.iea.org/statistics/ [November 2014].

4.3.2 Electricity

4.3.2.1 Features

4.86. From 2005 to 2012, total electricity production and consumption was quite stable at about 1 million GWh each year. Since then production has declined, and the fuel mix has changed as production from gas increased while production from nuclear declined. Consumption has also been relatively stable, peaking at just over 1 million GWh, but has declined sharply since 2011: reaching 923 GWh in 2012 (Table 4.19).

Table 4.19 Production and consumption of electricity, 2005-12 (GWh) 2005 2006 2007 2008 2009 2010 2011 2012 Production Gas 243,819 267,430 294,203 286,867 287,865 300,751 375,046 397,219 Coal 300,829 292,757 307,903 292,124 281,733 299,134 281,936 303,230 Oil 135,164 113,913 154,494 131,209 86,083 91,668 150,976 181,289 Hydro 86,350 97,340 84,234 83,504 83,832 90,682 91,709 83,645 Biofuels 15,340 15,339 16,095 15,448 14,346 29,095 29,150 30,241 Nuclear 304,755 303,426 263,832 258,128 279,750 288,230 101,761 15,939 Waste 7,060 7,299 7,275 7,322 7,457 7,114 8,170 8,332 Solar – pv 1,493 1,794 2,015 2,251 2,758 3,800 5,160 6,963 Wind 1,754 2,210 2,624 2,946 3,616 4,017 4,677 4,838 Geothermal 3,226 3,081 2,043 2,750 2,886 2,632 2,676 2,609 Total production 1,099,790 1,104,589 1,134,718 1,082,549 1,050,326 1,117,123 1,051,261 1,034,305

Losses 50,430 50,225 50,989 51,312 50,526 49,387 49,007 45,386

Consumption Industry 341,141 343,763 349,440 309,901 289,367 328,191 286,678 275,883 Transport 19,057 18,771 18,854 18,829 18,815 18,917 18,739 18,645 Residential 283,080 279,594 290,999 286,189 286,016 305,265 290,208 287,343 Services 332,334 339,890 349,068 346,373 338,143 342,665 337,806 333,058 Agriculture 969 864 925 882 876 895 858 893 N.e.s. 1,493 1,794 2,015 2,251 2,758 3,795 5,119 6,877 Total consumption 978,074 984,676 1,011,301 964,425 935,975 999,728 939,408 922,699

Source: International Energy Agency online database. Viewed at: http://www.iea.org/statistics/ [November 2014].

4.87. Up to 1995, electricity in Japan was provided by ten vertically integrated regional utilities companies with monopolies on generation, transmission, distribution and retail in their respective regions. All regions provide retail at 100 V, but the three regions in the east operate at 50Hz and seven in the west at 60 Hz. Although the sector has been gradually reformed over the past twenty years, the regional utilities are still the main producers, transmitters, distributors, and retailers, while interchange between some of the regions remains limited and the three frequency converters between the 50 and 60 Hz areas have a total capacity of only 1.2 GW (Chart 4.6). Okinawa is not connected to the others and operates at 60 Hz retail.

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Chart 4.6 Electricity regions, peak demand and interconnections, 2012

Hokkaido 5.40 GW

0.6 GW DC Tie line

5.56 GW 16.66 GW Kansai Hokuriku Tohoku 5.26 GW 13.95 GW 28.16 GW Chugoku 10.85 GW 12.62 GW 0.3 GW 5.56 GW

5.56 GW 2.4 GW Tokyo Kyushu Chubu 16.34 GW 1.4 GW DC Tie line 26.23 GW 50.93 GW

Shikoku 5.49 GW

1.2 GW frequency converter

60 Hz 100 V 50 Hz 100 V

Note: Font, circle and line sizes are illustrative and not proportional. Source: METI.

4.88. Each regional electricity utility has a monopoly on the retail of electricity to general consumers of less than 50 kW in its region. For other consumers, there are three other types of retailers: (i) general electric utilities; (ii) Power Producer and Suppliers (PPS) that may provide supply to consumers with contracts for more than 50kW; and (iii) specified electricity utilities may supply electricity to specified customers. In addition, wholesale electric utilities supply electricity to the general electric utilities. In most cases, the regional utilities are required to allow interconnections and provide a wheeling service for their networks. Since the reforms were introduced, the proportion of electricity generated by the general electric utilities has declined, from about 75% in 1994 to about 68% (Table 4.20).

Table 4.20 Power production in Japan in FY1994 and FY2012 (million kWh) FY1994 FY2012 General electric utilities 727,102 742,288 Wholesale electric utilities 122,158 68,256 Specified electric utilities .. 1,347 Power producers and suppliers .. 10,063 Private generation 115,071 271,996 Total 964,330 1,093,950

.. Not available. Source: The Survey of Electric Power Statistics of Japan.

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4.3.2.2 Policy and legislation

4.89. The Agency for Natural Resources and Energy and its Advisory Committee for Natural Resources and Energy in METI are responsible for energy policy, planning, and legislation as well as regulation of the industry. The Nuclear Regulation Authority in the Ministry of the Environment is responsible for supervision of nuclear power plants. METI has the authority to issue licences to electricity utilities, and to approve power sales' tariffs for the general electricity utilities and the specified electricity utilities. It may also issue service-related orders to electricity companies, including orders:

• to the general electric utilities and specified electricity utilities to improve operations;

• to a general electric utility to supply another utility in the case of emergencies, and to provide a wheeling service;

• to determine the price and contract period for electricity from renewable sources; and

• to a utility to enter a purchase or interconnection agreement with a producer of electricity from renewable sources.59

4.90. The Electric Power System Council of Japan (ESCJ) is the neutral transmission organization. The Council is made up of representatives of electric utilities, PPS, wholesale electricity suppliers, "auto-producers" (private generators), and "neutral members" (appointed based on nominations by the Board of Directors of the ESCJ). The ESCJ is responsible for: developing rules for the development of the electricity system including access to power, and the operation of power systems; dispute resolution; coordination of load-dispatching operations; and data collection and dissemination.60

4.91. Japan Electric Power Exchange (JEPX) is a non-profit private entity which was established in 2003 and composed of members from the electricity companies to operate the power exchange system. About 10,446 GWh was traded by JEPX in 2013.

4.92. The principal legislation regulating the electricity sector is the Electricity Business Act of 1964 since when it has been amended a number of times in line with the policy of partial liberalization of the sector:

• In 1995 the Act was amended: o To abolish the approval system for entering the wholesale business and to provide the legal bases for the establishment of the auction system for power purchasing; o To allow the establishment of Specified Electricity Utilities to use their own generation, distribution, and transmission systems for direct delivery to customers in some areas; and o To introduce 'Optional Supply Provisions' into the tariff system; • In 1999, the Act was revised again: o To allow partial liberalization for extra high voltage power for industrial and commercial users (between 20 kV and 2 MW) in the retail sector; and o To provide for a transition from an approval system to a notification system for some cases such as decreasing the electricity price; • The 2003 reforms: o Expanded liberalization gradually to reach customers contracted for 50 kW by 2008; o Enhanced regulation to ensure transparency in transmission and distribution and introduced accounting unbundling for the general electricity utilities to separate accounting of generation, transmission and distribution activities;

59 Sato N., Matsudaira S. (2013), p. 102. 60 ESJ online information. Viewed at: http://www.escj.or.jp/english/ [December 2014].

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o Established the Electric Power System Council of Japan; and o Established the Japan Electric Power Exchange; • The 2008 reforms focused on further regulatory changes such as activation of JEPX, and reforming the competitive conditions for accessing transmission lines; • The 2013 amendment provided for the establishment of the Organization for Cross- regional Coordination of Transmission Operators (OCCTO), which is to be established in 2015; and • In June 2014, the Act was amended again to allow for full retail competition planned for introduction in 2016.

4.93. Despite the gradual reform of the electricity sector from 1995 to 2008, it was reported in 2012 that the regional utility companies (or general electric utilities in Chart 4.6) continued to generate over 70% of total electricity and most transactions by independent power producers were bilateral long-run contracts, with the regional utilities and JEPX transactions accounting for less than 1% of total electricity generated. Similarly, PPS had a market share of only about 2% of the retail market.61

4.94. The 2013 and 2014 amended acts to the Electricity Business Act have followed the government's Electricity System Reform agreed in April 2013 with the objectives of securing a stable supply of electricity, suppressing electricity rates to the maximum extent possible, and expanding consumer choice and business opportunities.

4.95. The first step of the Electricity System Reform was provided for in the 2013 amendment to the Electricity Business Act and the subsequent Cabinet Order of June 2014 to establish the OCCTO in April 2015. OCCTO is to be a government authorized organization with the authority to aggregate and analyse supply and demand, the grid plans of the electric power companies. It will also have the authority to order changes to these plans, including ordering companies to reinforce generation and power interchanges under tight supply-demand situations. The second step of the reform, full retail competition, will begin around 2016 under the 2014 amendment and the government will decide whether to abolish the regulations for the retail tariff around 2018-20 or later depending on the competition status at that time. The third step will be the legal unbundling of the transmission and distribution sectors from the generation and retail sectors, the intention being to secure the neutrality of the transmission and distribution sectors.62

4.4 Finance

4.4.1 Features

4.96. The finance and insurance sector contributed ¥22,854 billion, or 4.9%, to GDP in 2011. This represented a decline in both absolute and relative terms compared to 2005 when the sector contributed ¥30,789 billion, or 6.1%m to GDP. Just over 1.5 million people are employed in the sector. However, although the contribution to employment and GDP may appear to be modest, the sector is very important to the economy as total savings continue to increase with banking and insurance companies' assets combined equal to 272% of GDP at end-March 2013 (Box 4.1).

4.97. The financial sector is relatively concentrated: the top three banks have a market share of over 41%, the top three life insurance companies with nearly 52%, and the top three non-life insurance with 65% of their respective markets.

4.98. Although not listed among the top banks in Box 4.1, Japan Post Bank is one of the largest in Japan in terms of deposits (about ¥176 trillion) and Japan Post Insurance one of the largest in terms of non-banking assets (about ¥90 trillion). Both the Japan Post Bank and Japan Post Insurance are wholly-owned subsidiaries of the state-owned Japan Post Holdings Co. Ltd.63 As noted in the last TPR report, the Postal Service Privatization Act of 2012 provides for the privatisation of Japan Post Holdings but does not set a specific deadline.64 According to the

61 Ito K. (2012), p. 11. 62 METI (2013a). 63 Japan Post Group (2013). 64 WTO document WT/TPR/S/276/Rev.1 of 18 June 2013, Chapter 4, paragraphs 46-50.

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authorities, the government of Japan is required to hold more than one-third of the shares of Japan Post Holdings Co. Ltd and will dispose of the shares over this threshold at the earliest possible time. The timing and extent of the sale of these shares has not yet been scheduled and will be determined taking into account various factors, such as stock market trends, opinions of specialists and consultations with Japan Post Holdings Co. Ltd.

Box 4.1 Market and regulatory regime for financial services, general overview

Number of financial services providers (end-December 2013): banks: 196, of which 106 regional banks; insurance companies: 96, of which 43 life insurance, and 55 non-life; securities companies: 252

Significant players (cooperatives, mutual institutions, and the postal system): JP Bank and JP Insurance in the Japan Post Group and mutual institutions (with mostly a regional and an SME focus)

Total bank and insurance companies assets, end-March 2013: - as % of the whole financial sector: banking companies: 51.4%, insurance companies: 21.1% - as % of nominal GDP: banking companies: 193.0%; insurance companies: 79.1% - as % of real GDP: banking companies: 176.2%; insurance companies: 72.2%

Major consolidations since January 2013: Banks: Merger between Mizuho Bank Ltd and Mizuho Corporate Bank Ltd (July 2013); merger between Kiyo Holdings Inc. and Kiyo Bank Ltd (October 2013) Securities: none Life insurance: none Non-life insurance: none

Market share held by the top 5 largest firms, end-March 2013: Banks (based on data for all banks across the country): top 3: 41.5%; top 5: 53.9% (Bank of Tokyo-Mitsubishi UFJ Ltd – 18.6%; Sumitomo Mitsui Banking Corporation – 13.8%; Mizuho Corporate Bank Ltd – 9.1%; Mizuho Bank Ltd – 8.5%; Sumitomo Mitsui Trust Bank Ltd – 3.9%) Life insurance: top 3: 51.7%; top 5: 69.0% (JP Insurance – 26.2%; Nippon Life Insurance Company – 15.9%; The Dai-ichi Life Insurance Company – 9.6%; Meiji Yasuda Insurance Company – 9.6%; Sumitomo Life Insurance Company – 7.7%) Non-life insurance: top 3: 65.2%; top 5: 84.3% (Tokio Marine and Nichido Fire Insurance Co. Ltd – 28.6%; Mitsui Sumitomo Insurance Company Ltd – 20.3%; Sompo Japan Insurance Inc. – 16.3%; Aioi Nissay Dowa Insurance Co. Ltd – 11.1%; Nipponkoa Insurance Co. Ltd – 7.9%) Employees pensions funds (by the financial statements for fiscal year 2012): top 3: 13.9%; top 5: 17.7% Mutual funds: top 3: 35.1%; top 5: 47.0% (Nomura Asset Management Co. Ltd – 16.6%; Daiwa Asset Management Co. Ltd – 10.3%; Nikko Asset Management Co. Ltd – 8.2%; Mitsubishi UFJ Asset Management Co. Ltd – 7.0%; Kokusai Asset Management Co. Ltd – 4.9%) Securities companies: top 3: 33.3%; top 5: 48.2% (Mitsubishi UFJ Morgan Stanley Securities Co. Ltd – 12.4%; Mizuho Securities Co. Ltd – 10.7%; Daiwa Securities Capital Markets Co Ltd – 10.1%; Nomura Securities Co. Ltd – 9.0%; SMBC Nikko Securities Inc. – 5.9% Credit rating agencies (end-December 2013 – based on number of rating analysts): top 3: 76.5%; top 5: 93.9% (Rating and Investment Information Inc. – 34.7%; Japan Credit Rating Agency Ltd. – 27.2%; Standard & Poor's Ratings Japan K.K: – 14.6%; Moody's Japan K.K. – 12.7%; Standard & Poor's Japan K.K. – 4.7%)

Ownership by type of activity: Banks (excluding foreign bank branches and locally incorporated foreign banks): Fully state-owned: 0 Government Financial Institutions: fully state-owned: 4 (Development Bank of Japan, Japan Bank for International Co-operation, Japan Finance Corporation and Okinawa Development Finance Corporation) Life insurance: fully state-owned: none; fully domestically-owned, private: 17; foreign minority-owned: 3; majority foreign-owned: 15; mutual companies: 5; branches of foreign companies: 3 Non-life insurance: fully state-owned: none; fully domestically-owned, private: 24, minority foreign-owned: 1; majority foreign-owned: 6; branches of foreign companies: 23; licensed specified juridical persons: 1 Mutual funds: domestic shareholders: 52; foreign shareholders: 32 (based on business reports of each fund submitted in FY2013 and on the nationality of the largest shareholder) Securities companies: domestic shareholders: 215; foreign shareholders: 67 (as at March 2013, based on the nationality of the largest shareholder) Credit rating agencies: domestic shareholders: 5; foreign shareholders: 2 (end December 2013, based on the nationality of the largest shareholder)

Specific taxes on financial transactions: No financial transaction tax (FTT); incomes from financial transactions are subject to tax; – tax on individuals differs by type of income.

Source: Information provided by the Japanese authorities.

4.99. The Financial Services Agency (FSA), which reports to the Cabinet Office, is the main regulator for financial institutions in Japan although it shares some prudential supervision with the Bank of Japan while the Japan Fair Trade Commission is responsible for competition policy issues. Within the FSA, the Securities Exchange Surveillance Commission (SESC) is responsible for the regulation of capital markets.

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4.100. The Ministry of Finance is responsible for general financial policy while the FSA handles planning and policy-making for the financial system, inspection and supervision, rules and regulations, accounting standards, supervision of certified public accountants and auditing firms, and represents Japan in international and regional discussions.

4.4.2 Banking

4.101. Excluding the Japan Post Bank, the total assets of banks were ¥926,375 billion and deposits of ¥653,856 billion at end March 2014, with foreign banks in Japan holding ¥39,520 billion in assets and ¥8,324 billion in deposits.

4.102. The result of the decade-long process of mergers and alliances among city banks, long term credit banks, and trust banks has been the creation of a relatively small number of "mega banking groups."65 The structure of the banking and financial services sector during FY2013-14 has been stable relative to previous years: the two mergers (Mizuho Bank and Mizuho Corporate Bank, and Kiyo Bank and Kiyo Holdings) were essentially corporate restructurings and no other mergers or acquisitions were reported (Box 4.2).

4.103. Since 2011, the FSA has amended the rules on large exposures in line with international standards, with effect from December 2014. Through supervisory guidelines and related measures, the FSA revised the minimum capital requirements for internationally-active banks and, according to the authorities, intends to introduce liquidity standards (Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR)), and capital buffers in accordance with Basel III (Box 4.2).

Box 4.2 Market and regulatory regime for banking

Economic indicators Non-performing loans as a percentage of total bank assets: 2.3% (end-March 2013) Net operating profits per employee: ¥16.9million Net income per employee: ¥10.3 million

Regulatory framework

Supervisory authorities: Ministry/agency responsible for defining banking sector policy: Financial Services Agency (FSA) Sector supervisor (monitoring bank liquidity, overseeing payment and settlement systems, etc.): FSA and the Bank of Japan Responsibility for competition policy issues: the Japan Fair Trade Commission

Preferential and bilateral policies: Preferential arrangements affecting banking services: none Bilateral agreements and MOUs (notably concerning prudential regulation and supervision): 7 Recognition of prudential measures of other countries through international agreements or unilaterally: none

Licensing: General criteria: 1. The person who has filed an application for a banking licence shall have the financial basis to conduct the business of a bank soundly and efficiently, and shall have good prospects for income and expenditure pertaining to the business. 2. In light of such matters as its personnel structure, the applicant shall have the knowledge and experience to be able to carry out the business of a bank appropriately, fairly and efficiently, and shall have sufficient social credibility (Banking Act, Article 4.2). Additional criteria for foreign banks: reciprocity test – Where a person whose entire or partial body of shareholders is a foreign bank, etc. files an application for a banking licence, if the foreign bank, etc. lawfully holds a number of voting rights in the person filing the application for a banking licence exceeding the number calculated by multiplying the voting rights of all of that person's shareholders by 50%, the Prime Minister shall examine whether it can be found that banks are given substantially the same treatment as under the Banking Act in the state where the principal business office of the foreign bank, etc. is located, in addition to the requirements prescribed in the preceding paragraph (Banking Act, Article 4.3). Where a foreign bank intends to receive a business licence, and where establishment of a branch office of the foreign bank requires permission from a foreign government agency or must go through any other procedures, the bank must present a written document to prove that the permission has been obtained (Ordinance for Enforcement of the Banking Act, Article 28). Licencing organ: the FSA Validity of a licence: a licence has no validity period Restrictions on banks selling or disposing of licences: allocated licences may not be sold; the abolition of banking and the dissolution of a bank shall not take effect without the authorization of the Prime Minister (Banking Act, Article 37.1).

65 Japanese Bankers' Association online information. Viewed at: http://www.zenginkyo.or.jp/en/banks/changing/index.html [December 2014].

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Minimum capital requirements to obtain a licence (domestic and foreign banks): ¥2 billion Recognition of home-country supervision: Where a foreign bank intends to receive a business licence, and where establishment of a branch office of the foreign bank requires permission from a foreign government agency or must go through any other procedures, the bank must present a written document to prove that the permission has been obtained (Ordinance for Enforcement of the Banking Act, Article 28). Other authorizations required: - A person who wishes to become a holder of voting rights in a single bank which amount to 20% or greater shall obtain authorization from the Prime Minister in advance (Banking Act, Article 52(9)). - When a branch office of a foreign bank wishes to establish a secondary office, it shall obtain authorization therefore from the Prime Minister (Banking Act, Article 47(3)).

Prudential regulations: Administrative allocation of financial resources: financial resources are not allocated administratively Determination of interest rates and fees: banks may determine interest rates and fees freely.

Measures to ensure compliance with the Basel Committee's Core Principles for Effective Banking Supervision: The FSA states in supervisory guidelines: "the FSA tries to reflect principles and guidelines, with regard to bank supervision, which the Basel Committee, etc. develops on their supervision". The FSA has revised the Banking Act, supervisory guidelines, and inspection manuals, based on the Basel Committee's Core Principles (BCP). When the BCP itself is revised, the FSA will review the parts of the guidelines that relate to the revised parts of the BCP, as necessary. To ensure compliance with the BCP, the FSA implements inspections and supervision while taking into consideration the scale and complexity of financial institutions.

Specific provisions against money laundering: Specified business operators including financial institutions are working on customer identification, preparation and preservation of transaction records etc., and reporting of suspicious transactions, which are obligations under "the Act on Prevention of Transfer of Criminal Proceeds". The FSA is encouraging efforts in financial institutions, through examination and supervision.

Bank deposit insurance scheme: The government introduced the deposit insurance system to protect depositors in failed financial institutions and to contribute to the smooth settlement of funds. Non-interest-bearing deposits, such as current deposits are protected in full. The status of other deposits, such as time deposits and ordinary deposits: no more than ¥10 million and interest / person / financial institution; protection, in excess of that amount: depends on the asset status of the failing financial institution. The Deposit Insurance Corporation of Japan (DICJ) is responsible for deposit insurance operation, and failure resolution, as well as the purchase of non-performing loans, and capital injection programmes.

Source: Information provided by the Japanese authorities.

4.4.3 Insurance

4.104. The insurance subsector in Japan has been characterised as having four distinct kinds of institutions:

• Given its size, number of outlets, and range of insurance products, Japan Post Insurance could be considered as a category in itself with ¥6,481.7 billion in premiums, etc. in 2012;

• The insurance cooperatives (kyosai kumiai), the largest of which is the agricultural cooperative JA Kyosai with a reported US$71 billion in premiums in 2010 while the next four had US$15 billion;

• Private domestic general insurance companies, with ¥28,957.2 billion in premiums, etc. in 2012 make up the largest group and are dominated by the traditional companies with the top three having over half the total life insurance market (JP Insurance, Nippon Life Insurance Company, and Meiji Yasuda Life Insurance Company) (Box 4.1); and

• Foreign general insurers, which were reported to have had about 16% of the insurance market in 2010.66 There are 15 majority foreign-owned, 4 minority foreign-owned, and 4 branches of foreign life insurance companies, while there are 23 minority foreign- owned and 1 majority foreign-owned, and 4 branches of foreign non-life insurance companies.67

66 Binder S., Luc Ngai J. (2012), p. 109. 67 WTO document WT/TPR/S/276/Rev.1 of 18 June 2013, Chapter 4, paragraph 51.

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4.105. The 6,619 kyosai or cooperative insurance societies represent a significant part of the insurance market with 13.4% of total life and non-life markets. Kyosai are exempt from the Insurance Business Act. Some – the regulated kyosai – are regulated by various ministries depending on the specific legislation governing their activities. For example, JA Kyosai is regulated by the MAFF under the Agricultural Cooperative Act. Others are essentially unregulated, provided they target specific groups of people. A bill to amend the Insurance Business Act to allow for the regulation of unregulated kyosai took effect from April 2006.

4.106. Box 4.3 provides details on the regulatory regime for the insurance sector.

4.4.4 Securities

4.107. At the end of 2013, the total market capitalization of companies listed on the first section of the Tokyo Stock Exchange was equivalent to 365% of GDP and bond market capitalization was 939% of GDP (Box 4.4).

4.108. The regulatory regime (Box 4.4) for financial services has continued to evolve. The prohibition on naked short selling, first introduced for six months following the 2008 financial crises and renewed several times, was made permanent and revised rules on short selling in general were introduced with effect from 5 November 2013. Since December 2012, Japan has required mandatory clearing of over-the-counter derivative transactions and, since April 2013, it has also required mandatory reporting. Mandatory trading on electronic platforms will be introduced by September 2015.

Box 4.3 Market and regulatory regime for insurance

Penetration (premiums as share of GDP): Life insurance: 7.2%; non-life insurance: 1.7%

Regulatory framework

Supervisory authorities: Ministry/agency responsible for defining insurance sector policy, and for supervision of the sector: the FSA, ministries specified in law for regulated kyosai Responsibility for competition policy issues: the Japan Fair Trade Commission

Preferential and bilateral policies: Preferential arrangements affecting insurance services: none Bilateral agreements and MOUs: 2

Licensing: Criteria for assessing applications for insurance licence: sufficient financial and organizational base to conduct insurance underwriting; and whether the underwritten insurance products are appropriate Incompatibility of life and/or non-life insurance licences: insurance companies may conduct only one of these businesses Differential treatment for foreigners in the licensing process: no distinction under the Act Prior approval of home-country supervisor: compatible home-country regulation and other criteria applied exclusively to foreigners: a foreign insurer requires a certificate from an organization whose jurisdiction includes the home country, proving that the insurer is lawfully conducting insurance business in its home country that is similar to the insurance business it intends to conduct in Japan Limitation on number of providers: none Licencing authority: the FSA, which is the single administrative organ for the consideration of licence applications Maximum processing time for applications: there is no provision under the Act for a maximum but the standard "to be attempted" is within 120 days Period of validity of a licence: without special conditions, a licence has no specified period of validity Restrictions on selling or disposing of licences: allocated licences may not be sold; where insurance companies abandon their insurance business, their licences become void Other authorization required: approval from the Prime Minister is required for the acquisition of over 20% of the shares of an insurance company. This measure is non-discriminatory.

Prudential regulations: Differences of treatment between state-owned firms, other domestically owned firms, foreign-owned branches, and foreign-owned subsidiaries: foreign-owned subsidiaries are required to hold in Japan the necessary assets in order to secure an insurance policy that provides for the company's potential collapse (Insurance Business Act, Article 197) Also, foreign-owned subsidiaries are exempt from a consolidated solvency margin standard Recognition of home-country supervision of foreign insurance companies: To obtain a licence, a foreign insurance company must be "carrying on Insurance Business in a foreign state in accordance with the Acts and regulations of the foreign state": home-country supervision of the foreign insurance company is recognized (Insurance Business Act, Article 2(6), 185(1))

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Minimum capital requirements to obtain a licence: ¥1 billion. Foreign insurance companies are required to deposit ¥200 million with the deposit office in Japan (Insurance Business Act, Article 6: 190) Other prudential tests for licence applicants: ¥1 billion minimum capital requirement. In processing licence applications, consideration is given to ensuring equity capital in accordance with the contents and scale of the business anticipated, and a sufficient financial base to conduct the business of an insurance company soundly and efficiently, as well as to having good prospects for income and expenditures pertaining to the business (Insurance Business Act, Article 5(1)(i)). In addition, the solvency margin ratio of each insurance company must always be no less than 200% Administrative allocation of insurance services: insurance services are allocated administratively Approval required for life and non-life premiums and products: the contents of insurance products, premium rates, etc., are subject to review at the time of application for a licence. Also, approval is required from the FSA to revise the contents of insurance products, insurance premiums, etc., (Insurance Business Act, Article 5(1)(iii)(iv), 123(1), 187(5), (207)).

Note: The FSA is the supervisory authority for both activities, assisted by the Minister for Health, Labour and Welfare for pension funds. For management and sales of investment trust, licensing takes the form of a registration procedure. Criteria taken into account are historical records of applicants, financial and organizational soundness, and minimum capital (¥50 million at least). Foreign companies intending to exercise these activities must be exercising the same activity in their home country under appropriate supervision and must have a branch or office in Japan. Licences have no fixed duration and are not transferable. There is no limitation on the number of providers. Box 4.5 details the main economic indicators and the general regulatory framework of mutual funds and pensions fund services in Japan. Source: Information provided by the Japanese authorities.

Box 4.4 Market and regulatory regime for securities

Economic indicators

Total market capitalization of companies listed on the first section of the Tokyo Stock Exchange (end of each quarter 2013): ¥ million: 359,766,497 (March); 393,957,453 (June); 417,303,078 (September); 458,484,253 (December) % of nominal GDP: 307.38% (March); 332.64% (June); 355.39% (September); December 365.40% (December) % of real GDP: 275.34% (March); 307.00% (June); 318.38% (September); 338.78% (December)

Bond market capitalization (total outstanding amount of bond issues, end of each quarter 2013): including Government Bonds, Fiscal Investment and Loan Program Bonds, Local Government Bonds, Government-backed Bonds, FILP Agency Bonds, etc. , Bank Debenture Bond, and Corporate Bonds ¥100 million: 11,476,488 (March); 11,663,887 (June); 11,705,899 (September); 11,783,802 (December) % of nominal GDP: 980.54% (March); 984.86% (June); 996.92% (September); 939.15% (December) % of real GDP: 878.33% (March); 908.94% (June); 893.11% (September); 870.72% (December)

Regulatory framework

Supervisory authority and licensing organ: The FSA

Additional criteria for foreign firms: for sales of investment trusts (Type I Financial Instruments Business), registration requires a corporation to be an entity that is carrying out business of the same sort in its home country in accordance with laws and regulations of the corresponding foreign country.

Period of validity of a licence: none Transferability of licences: not transferable Limitation of the number of providers: none Restrictions on foreigners buying and selling on the stock market: A member of the Financial Instruments Exchange Market is limited to either (1) a Financial Instruments Business Operator (request for registration by the Prime Minister), (2) Authorized Transaction-at-Exchange Operator (request for authorization by the Prime Minister), or (3) Registered Financial Institutions (request for registration by the Prime Minister) Other authorization required: obligation to register branch offices for brokers. This measure is non-discriminatory

Operating conditions: Requirements to use international accounting and disclosure standards: In October 2013, relevant Cabinet Office Ordinances were amended to eliminate the two requirements: "Being a listed company in Japan" and "Conducting financial or business activities internationally". As a result, a company may prepare its consolidated financial statements in accordance with the International Financial Reporting Standards (IFRS) if: all of the following requirements are met: (1) The Annual Securities Report contains a description of the special approach taken to ensure the appropriateness of the consolidated financial statements (2) Board members and employees who have sufficient knowledge about designated international accounting standards are assigned, and the system in which the consolidated financial statements can be prepared, based on the designated international accounting standard, is maintained On 12 December 2008, in agreement with the European Union, the Japanese GAAPs (Generally Accepted Accounting Principles) were evaluated to be equivalent to International Financial Reporting Standards (IFRS) as adopted by the European Union (EU). (Since January 2009, Japanese companies that are listed on markets within the EU have been able to use the Japanese GAAPs when making disclosures in Europe.)

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Provisions on shareholders' rights in companies listed on stock exchanges: The Financial Instruments and Exchange Act does not provide any special regulations on shareholders' rights for companies listed on the financial instruments exchange.

Provisions on companies' disclosure obligations: - for companies listed on financial instruments exchange: disclosure of company information in accordance with securities listing regulations; to protecting shareholders' rights, rules are described in the "Corporate Code of Conduct" - for general companies: (a) Offering disclosure: among public offerings or secondary distributions of securities of which the total issue price or total distribution price is 100 million yen or more, the issuer must submit a securities registration statement to the Prime Minister before a public offering or secondary distribution (Financial Instruments and Exchange Act, Article 4(1)); also, the issuer must prepare and deliver a prospectus to investors before (or at the same time as) delivering the securities (Article 15(2)); (b) Ongoing disclosure: an issuer of listed securities on the financial instruments exchange or of a public offering or secondary distribution of securities, is obligated to submit its security report after the end of each business year (within 3 months) to the Prime Minister (Financial Instruments and Exchange Act, Article 24(1)); a quarterly securities report must be submitted to the Prime Minister within 45 days of the end of every fiscal quarter (Article24-7(1)); and when making a public offering or secondary distribution of securities in a foreign state, these issuers must submit an extraordinary report to the Prime Minister without delay (Article 24-5(4)).

Source: Information provided by the Japanese authorities.

4.109. The 2014 amendments of the Financial Instruments and Exchange Act introduced several changes to the legislation regulating securities to take account of new developments in securities offers and trades and improve the overall attractiveness of Japan's financial and capital markets. The amendments include the introduction of measures to promote the use of security-based crowdfunding, the introduction of a new trading system for non-listed shares, removal of the obligation on financial instruments business operators to have business years ending 31 March, exempting treasury stock from large shareholding reporting rules, and establishment of procedures for confiscation of electronic share certificates.68

4.4.5 Pension and mutual funds

4.110. There were changes to regulations for pension mutual funds over the past few years. The FSA is the supervisory authority, assisted by the Minister for Health, Labour and Welfare for pension funds. For management and sales of investment trust, licensing takes the form of a registration procedure. Criteria taken into account are historical records of applicants, financial and organizational soundness, and minimum capital (¥50 million at least). Foreign companies that want to operate pension or mutual funds in Japan must have a branch or office in Japan and operate the same activity in their home country under appropriate regulation and supervision. Licences have no fixed duration and are not transferable. There is no limitation on the number of providers. Box 4.1 details the main economic indicators and Box 4.5 the general regulatory framework of mutual funds and pensions fund services in Japan.

Box 4.5 Market and regulatory regime for pension funds and mutual funds

Recent changes: Some revisions including revision of the consolidation procedures and improvement of investment reports are going to be made from the viewpoint of making the regulation flexible to suit trends in international rules and changes in social and economic circumstances, and ensuring the supply of appropriate products in consideration of ordinary investors.

Supervisory authorities: FSA registration required to carry out management and sales for investment trust.

Responsibility for pension fund regulation and supervision: Minister for Health Labour and Welfare.

Licensing criteria: Registration with the FSA. Conditions to be considered are: historical records of violations, appropriateness, and sufficiency of human resources organization; a board of directors, corporate auditors or a committee must be established; and capital must be more than ¥50 million.

68 FSA (2014).

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Additional licensing conditions for foreign companies: The corporation must be handling the same sort of business in its home country in accordance with law and regulations of that country, and must have a branch or office in Japan.

Period of validity of a licence: none Transferability of licences: licences are not transferable Limitation on the number of providers: none

Source: Information provided by the Japanese authorities.

4.5 Telecommunications

4.5.1 Features

4.111. Japan has a highly-developed and technologically-advanced telecommunications sector characterised by high investment, rapid adoption of new technologies, and readiness to switch off legacy systems: in 2011, Japan had more fibre-to-the-home subscriptions than the European Union; in June 2012 the last 2G network was switched off by KDDI; and NTT intends to switch to optical FTTH and cease copper based telephone and ISDN networks.69 According to the Ministry of Internal Affairs and Communications (MIC), the information, communication technology (ICT) market was worth ¥82.7 trillion in 2011, accounting for 9% of all industries, and employed 3.897 million people, or 6.9% of total employment.70

4.112. The telecommunications market in Japan has evolved considerably from the time when it was dominated by NTT and KDDI (which had monopolies on national and international telecommunications respectively). NTT East and NTT West combined now have slightly more than half the fixed-line market, and, although NTT DoCoMo remains the biggest supplier of mobile services, its net income has been relatively static for several years while SoftBank mobile and KDDI have expanded. NTT Corporation owns 100% of NTT East, NTT West, and NTT Communications, about 63.3% of NTT DoCoMo, about 54.2% of NTT Data, and owns or has holdings in many other companies both within and outside Japan.71 The NTT Corporation, which is the largest telecommunications company in the world, is 35.7% owned by the government and other public bodies (as at March 2014).

4.113. NTT East and NTT West are officially designated as the dominant suppliers for subscriber lines, and NTT DoCoMo for mobile telephony. As stated in the last review, NTT East and NTT West are designated as universal service providers and are required to provide wired telephone services in all areas (i.e. analogue or, since April 2011, optical IP telephone equivalent in addition to public telephone services and emergency calls). Contributors to the universal service fund are carriers with annual sales greater than ¥1 billion which are interconnected with facilities installed by NTT East or NTT West to provide universal service. Calculation of the amount of compensation varies with the type of service. Funds are collected by the Telecommunications Carriers Association, which has been designated as the universal service support institution.72 The amount of expenditure approved for this fund in 2013 was ¥6.9 billion.

4.5.2 Policy and legislation

4.114. The Strategic Headquarters for the Promotion of an Advanced Information and Telecommunications Network Society (IT Strategic Headquarters) in the Cabinet is responsible for general strategy on information and telecommunications technology. In June 2014 the Headquarters revised the Declaration to be the World's Most Advanced IT Nation. The Declaration noted: that a lot of progress had been made in installing advanced infrastructure and emphasised the need to use this infrastructure to its full potential; that eGovernment development could more efficient and better coordinated among public agencies; and that IT was critical in disaster management and played an important role in areas like rural development and agriculture.73

69 Fasol G. (2014) and authorities. 70 MIC (2013), pp. 48-49. 71 NTT Corporation online information. Viewed at: http://www.ntt.co.jp/ir/fin_e/index.html [December 2014]. 72 WTO document WT/TPR/S/276/Rev.1 of 18 June 2013, paragraphs 4.71-72. 73 IT Strategic Headquarters (2014).

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4.115. The MIC is the government agency primarily responsible for telecommunications policy and legislation, and for regulating the sector (Box 4.6). The Ministry publishes an annual white paper describing recent developments in ICT and public policy for the sector. MIC has also been the agency responsible for assigning spectrum for communications, including the 2012 allocations of spectrums for LTE mobile phones.

Box 4.6 Market structure and regulatory regime for telecommunications sector, 2013

Economic data

Main actors: Companies providing value-added telecom services: 318 carriers are registered with the Minister; and 16,193 carriers have submitted notifications (up to 1 September 2014). Market leaders for fixed telecom services: NTT East and NTT West (combined market share for fixed telecom service 54.8%, (June 2014)). Market leaders for mobile services (cellular phones, PHS, and BWA): NTT DoCoMo (39.9%), KDDI (including Okinawa Cellular, 25.8%), SoftBank Mobile (22.9 %), (June 2014). Main internet access providers (incl. ADSL, fibre-to-home providers, and cable-based access): NTT group (27.9%), vendor group (26.8%), KDDI group (17.9%), (March 2014). Foreign ownership participation: Except for the Nippon Telegraph and Telephone Corporation, there are no restrictions in Japan's telecommunications carriers. Foreign ownership shares of listed telecom companies are not available. State ownership: Nippon Telegraph and Telephone Corporation – 33.3%

Tariffs: (evolution since Japan's last TPR (2013)) Local services: no changes on basic monthly charges or local call rate (subscriber lines) of NTT East and NTT West. Mobile services: NTT DoCoMo, Type S Value: basic monthly service rate – ¥3,000; call rate – ¥108 per 3 minutes (excluding tax). Basic monthly service rate includes a communications allowance of ¥2,000 (excluding tax). NTT DoCoMo, Kakehodai-plan (call-free plan): basic monthly service rate – ¥2,700; call rate – free (this service began in November 2014). Internet services: Ministry of Internal Affairs and Communications does not regulate the internet connection fee. No changes. Interconnection rates: (monthly charge per line) for optical fibre significantly lowered to: - Dry copper local loop: NTT East: ¥1,269, NTT West: 1,345 (in 2014) - Line sharing local loop: NTT East: ¥87, NTT West: ¥88 (in 2014) - Single star optical fibre: NTT East : ¥3,159, NTT West: ¥3,206 (in 2014) - Shared-access optical fibre: NTT East: ¥2,808, NTT West: ¥2,847 (in 2014) - Mobile phone interconnection rates: significantly lowered, e.g. NTT DoCoMo: ¥24.3/3 min. (in 2009), ¥10.26/3 min. (in 2013).

Establishment of new companies, mergers or closures since Japan's TPR: Registered telecommunications carriers decreased in number by 6, notified telecommunications carriers increased in number by 564 (8 newly registered, 1,119 newly notified) (1 Sep. 2014).

Regulatory framework

Interconnection: Recent or planned changes: none Complaints filed or resolutions effected for interconnection disputes among operators: one request for the Minister of Internal Affairs and Communications to start negotiations since 2010.

Competition policy: Results of the "competition review in the telecom business field (2013)": Fixed telephone and dedicated service markets: a single operator has strong market power and the possibility of using its position to exercise market power; MIC estimated that regulations in the market are sufficient and WAN service has strong competitive pressures in the corporate service market. Toll bypass telephony, cellular phone (including PHS and BWA, broadband, FTTH, and ADSL market, a single operator is in a position to exercise its market power, or multiple carriers are in a position to exercise their market power in an alliance under an oligopoly; MIC estimates that the existence of regulations and competitive pressures from the other service are sufficient. 050-IP telephony and WAN service market: multiple operators are in a position to exercise their market power in an alliance under an oligopoly; MIC estimates that the existence of regulations and competitive pressure in 050-IP telephony and WAN service markets are sufficient. ISP market: MIC estimates that no operator can use market power. Japan Fair Trade Commission regulations and actions: The JFTC establishes Guidelines Concerning the Interpretation of "Specific Business Field" as defined in the Provisions of "Monopolistic Situation" in the Antimonopoly Act. The JFTC, as appropriate, monitors trends of production, sale, price, manufacturing costs, and technical innovations, and profit ratios. As for the telecommunication sector, fixed telecom and mobile telecom have been shown in the annex since 2004, and broadband services since 2010.

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Ministry of Internal Affairs and Communications promotes competition in the telecom market. Dominant suppliers: NTT East and NTT West (subscriber lines) NTT DoCoMo (mobile phones)

Other regulatory aspects: Regulatory supervision: For carriers installing Category I designated telecommunications facilities – functional separation of the facility department and the sales department introduced to ensure appropriate supervision of subsidiaries and appropriate management of information obtained through the business activities of interconnection (Telecommunications Business Act, Article 31; the Ordinance for Enforcement of Telecommunications Business Act, Article 22). Facility sharing: no changes Local loop unbundling: no changes Number portability: system introduced by Article 4 of Rule of Interconnection, no changes since 2011 Spectrum management: Licence required from the Minister of Internal Affairs and Communications to operate a radio station. However, if a radio station meets a specific requirement it may be operated only by registration (without a licence). Mobile interconnection: amendment to the Telecommunications Business Act in December, 2010: rules for interconnection accounting introduced for the telecom carriers with Category II designated telecommunications facilities in March 2011 (Telecommunications Act as amended, Article 34). Mobile roaming rates (wholesale and retail): No regulation Accounting rates: no changes Licensing: Operators of telecommunications businesses with large-scale telecommunications circuit facilities must be registered by the Minister of Internal Affairs and Communications; operators with small-scale telecommunications circuit facilities or without telecommunications circuit facilities must submit a notification to the Minister.

Universal service

Beneficiaries: Telecommunications carriers that provide universal services and are designated by the Ministry of Internal Affairs and Communications (MIC) as carriers meeting the requirements (eligible telecommunications carriers: NTT East and NTT West).

Contributors: Telecommunications carriers that have connections to universal service facilities of NTT East and NTT West (limited to carriers with sales of ¥1 billion or more) Services covered: (1) analogue fixed telephones (access lines for analogue fixed telephones) or optical IP telephone equivalent with analogue fixed telephones (included in universal services from April, 2011); (2) Category I public telephone service; (3) emergency calls (dial 110, 118,119).

Expenditure (approved in 2013): total compensation for NTT East and NTT West – ¥6.9 billion Method of calculation: - for access lines for analogue fixed telephones: benchmark method for the top 4.9% of the high-cost regions; when the cost per line exceeds the national average cost + double standard deviations, part of the cost will be covered by the universal service fund - category I public telephone service: cancel-out cost-revenue calculation method - emergency calls: costs of emergency lines that correspond to the top 4.9% high cost lines out of all access lines for analogue fixed telephones are compensated - optical-IP telephones equivalent to analogue fixed telephones: excluded from compensation. Management: Telecommunications Carriers Association (universal telecommunications service support institution) is responsible for collecting contributions from carriers and providing the subsidies. The institution must obtain permission from the MIC regarding the annual subsidies and contributions. Specific tax incentives regime for the telecommunication sector: no changes.

Source: Information provided by the Japanese authorities.

4.116. The main laws setting the legal basis for the regulation of telecommunications include:

• The Wire Telecommunications Act of 1953 (last amended in 2010) for wired transmissions, including copper and fibre transmissions, including fixed telecoms services, cable television and wired broadband;

• The Radio Act of 1950 (last amended in 2014) for wireless transmissions, including mobile phones, terrestrial and satellite television broadcasting infrastructure, and some wifi networks;

• The Telecommunications Business Act of 1984 (last amended in 2014) which covers telecommunications businesses; and

• In addition to these laws, secondary legislation through Cabinet Orders, Ministerial Ordnances, etc. set out detailed rules for their application and interpretation.

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4.6 Transport

4.6.1 Maritime transport

4.117. Japan depends on maritime transport for its trade with 88% of imports and 71% of exports by value carried by sea and 967 million tonnes are transported by ocean-going vessels. Furthermore, reflecting the fact that Japan is made up of numerous islands, coastwise shipping accounts for a significant proportion of domestic cargo transport with 366 million tonnes of cargo transported by coastwise shipping in 2012.74 According to the Japan Federation of Coastal Shipping Associations, coastal shipping accounted for 32% of the tonne-kilometres for domestic transport in 2009.75

4.118. According to UNCTAD, the relatively high proportion of high-value vessels in the Japanese- owned fleet means that, in value terms, it is probably the highest in the world at nearly US$100 million. According to UNCTAD's report, on 1 January 2013, the fleet of Japanese flagged vessels and beneficially-owned vessels sailing under foreign or international flags was the second largest in the world in tonnage terms at 223.8 million tonnes for nearly 4,000 vessels.76 According to the Japanese authorities, the fleet of Japanese-flagged and owned vessels greater than 2,000 tonnes was 2,848 vessels for a total tonnage of 190.8 million tonnes (Table 4.21)

Table 4.21 Maritime transport, main economic indicators, June 2012

Tonnage (DWT) Fleet Vessels (number) (million tonnes) (% of world tonnage) National flag 150 18.61 .. Of which foreign controlled 0 0 .. Beneficially owned fleet under foreign flags 2,698 172.18 .. Volume ('000 % of Japan's tonnes, except for Value (¥ billion) international trade (all containers: 2012 mode of transport) Merchandise trade '000 TEU) FY2009 2012 Imports Exports Imports Exports Imports Exports c.i.f. f.o.b. International maritime freight trade 988,103 280,917 70,689 63,748 88.1 71.0 Of which containers 8,770 8,750 24,330 29,368 39.9 43.9 Of which transhipped 130 135 ...... Of which dry bulk 338,687 74,583 10,469 7,545 15.3 11.3 Of which liquid bulk 378,805 25,358 24,582 3,100 31.6 1.7 Domestic maritime freight trade 705,939 721,417 ...... Of which conducted under a waiver regime ...... Date & Type of Managing company(ies)/ Volume duration of Privately managed terminals cargo Nationality (TEU) the contract Tokyo (some) Container Tokyo Port Terminal Corporation 4,510,778 01.04.2008 /Japanese (volume 2013) Hakata (some) Container HAKATA PORT TERMINAL Co. Ltd 772,123 20.02.2014 /Japanese (volume 2013) Ibaraki Port Hitachinaka District (some) Container Ibaraki Port Authority Corporation 7,605 06.2000 /Japanese (volume 2012)

.. Not available. Source: Information provided by the Japanese authorities.

4.119. Although the Japanese-owned fleet may be the most valuable and one of the largest in the world, it declined significantly from 1995-2005. To address the decline, the government has introduced several support measures, including tax incentives and shared purchase programmes, (see below) and, since 2005, the rate of decline in the number of vessels has slowed while the total tonnage has increased.77

74 MIC (2014), Table 12-16 and 12-17 and Japanese authorities. 75 Japan Federation of Coastal Shipping Associations online information. Viewed at: http://www.naiko- kaiun.or.jp/e/about/about_cargo.html [December 2014]. 76 UNCTAD (2013), pp. 42-43. 77 MIC (2014), Table 12-15.

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4.120. Maritime shipping policy and national legislation are the responsibility of the Maritime Bureau in the Ministry of Land, Infrastructure, Transport and Tourism (MLIT). The Maritime Bureau represents Japan at the International Maritime Organization. The Bureau is responsible for setting standards, security, regulation, etc.

4.121. Under the MLIT is the Japan Transport Safety Board, which was formed in 2008 with the merger of the Japan Marine Accident Inquiry Agency and the Aircraft and Railway Accidents Investigation Commission. The National Maritime Research Institute, an incorporated administrative agency under MLIT is a research centre for maritime technologies.

4.122. The Japan Maritime Center, which is described as a public interest incorporated foundation, contributes to policy formation through research and consultation with different stakeholders. The Center was established in April 2007 with the merger of the Japan Maritime Foundation and the Japan Maritime Development Association with funding from the Japanese Shipowners' Association and the Japan Federation of Pilots' Associations.78

4.123. The main laws covering maritime transport of goods are: the Basic Act on Maritime Policy of 2007, the Carriage of Goods by Sea Act of 1992; the International Carriage of Goods by Sea Act of 1957; the Maritime Traffic Safety Law of 1972; the Port and Harbour Act of 1950; the Port Regulations Act of 1948; and the Ship Safety Law.

4.124. In March 2012, MLIT established the Ocean Policy Panel to implement the Basic Plan on Ocean Policy of 2008.79 The Plan and Panel address many aspects of marine policy including exploration and exploitation of minerals, fisheries, and the environment, as well as maritime transport. On maritime transport, the Policy recognises the challenges facing maritime transport in Japan, particularly the decline in the number of Japanese-flagged vessels, the aging of the maritime workforce, and the increasing competition in the region.80

4.125. Japan does not discriminate against foreign participation in international maritime services and accords national treatment (Table 4.22). However, cabotage restrictions mean only Japanese flag carriers may carry goods and passengers from one Japanese port to another although, under treaties of friendship, commerce and navigation, Japan allows ships to access cabotage services on a reciprocal basis by obtaining permits from MLIT.

4.126. In 2008, a tonnage tax system was introduced which gave oceangoing shipping companies the option of switching away from tax on profits to a tax system based on tonnage (Table 4.22). The scheme was to operate until end-FY2013 but it has been extended until end-FY2018 and the scope extended to included foreign-flagged vessels operating by Japanese shipping firms and their overseas subsidiaries, provided the flag can be changed to Japan following a navigation order under maritime transport law.

4.127. The Japan Railway Construction, Transportation and Technical Agency (JRTT) provides support to coastal shipping by sharing the cost and ownership of vessels, with JRTT taking 70-90% of costs and ownership. The domestic shipping company pays a usage fee to JRTT for the period of joint ownership which is 7-15 years. JRTT is an independent administrative agency which was created in 2003 by integrating the Japan Railway Construction Public Corporation (JRCC) and the Corporation for Advanced Transport and Technology (CATT – which had incorporated several other entities including the Maritime Credit Corporation and the Association for Structural Improvement of the Shipbuilding Industry). At the end of FY2013, JRTT owned 347 ships with a joint-ownership value of ¥365.3 billion. JRTT also provides subsidies to coastal shipping companies for the take up of new technologies, such as electric propulsion systems, as well as support for ferry services to remote islands. In FY2012 and FY2013, subsidies for Practical Application of Advanced Ship Technologies were ¥95.7 million and ¥45.7 million respectively.81

78 Japan Maritime Center online information. Viewed at: http://jpmac.or.jp/english/introduction.htmlJapan [December 2014]. 79 MLIT (2012), p. 118. 80 MLIT (2008), pp. 10, 14-15, 26. 81 JRTT (2013), pp. 10-15 and 26; and the authorities.

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Table 4.22 Trade-related maritime transport policies

Competition policy Scope of the anti-trust immunity: Marine Transportation Law, Article 28 item (4) Immunity "to conclude an arrangement or agreement or to conduct concerted act concerning the fares or charges and other transportation conditions, routes, allocation of ships as well as sharing of shipping between a ship operator and other ship operators on routes between ports in Japan and a territory other than Japan", i.e. conferences, agreements, discussion agreements, stabilization agreements and vessel sharing agreements and consortia in liner shipping and tramp pools in bulk shipping. Filing requirements: Marine Transportation Law Article 29-(2) "Any ship operator shall, if he/she intends to engage in the act provided for in Article 28 item (4) or to alter the content thereof, notify beforehand Minister of Land, Infrastructure, Transport and Tourism to that effect". Marine Transportation Law Article 50 "Any person to whom any of the following items applies shall be liable to a fine of not more than one million yen, item (24) Anyone who has taken action under item 4 of Article 28, or has altered the content of such action, without submitting notification under the provisions of Article 29-(2), Paragraph 1, or who has made a false notification under the same provisions". Last review concluded: FY2010, by the MLIT in consultation with JFTC, no changes. Next planned review: FY2015 Tonnage tax: Introduced in 2008 until the end-FY2013 (March 2014); characteristics unchanged corporate tax rates but net profit deemed to be: - for vessels less than 1,000 NT, ¥120/100 NT; - for vessels over 1,000 and up to 10,000 NT, ¥90/100 NT; - for vessels over 10,000 and up to 25,000 NT, ¥60/100 NT; and - for vessels over 25,000 NT, ¥30/100 NT. The tonnage tax system has been extended to end-FY2018 (March 2019) and the scope expanded to cover "deemed-Japanese-flagged-vessel"* with tax rates of one and a half times those for Japanese-flagged vessels. (* "deemed-Japanese-flagged-vessel" means a foreign-flagged-vessel operated by Japanese shipping firm and owned by their overseas subsidiaries which can change its flag to Japan immediately in case of issuing order of navigation in accordance with maritime transport law.) Other support measures: - Additional depreciation of 18% can be applied to Japanese-flagged vessels; may opt for either declining- balance method or the straight-line method. - "roll over relief" i.e. deferred taxation of capital gains in case of sale of old vessels replaced by new vessels; system extended in 2014 until the end of FY2017. - Coastal Shipping Tentative Measures Program: scrapping incentives FY2013: Not applicable. - Coastal shipping joint ownership scheme under JRTT. International ship regime (ISR): Ship registration tax under the ISR regime and the Japanese ordinary register (for a 85,000 GT bulker) (1) ISR vessels – ¥38.8 million (2) non-ISR vessels – ¥44.3 million In order to receive tax relief, an ISR vessel must correspond (1) and (2) of the following requirements, and must meet at least (3) or (4) of the following: (1) the vessel must be more than 2,000 GT; (2) the vessel must navigate in the ocean-going sea areas; (3) the vessel must board non-Japanese seafarers with a certificate issued by the Minister of Land, Infrastructure, Transport and Tourism; (4) the vessel must be LNG or RO-RO type. Companies may apply for the ISR scheme as long as they are established under Japanese law, regardless of their shareholders. Passenger transport: Remote island sea routes are subsidised by regional public transport for management and improvement projects and passenger fares. 300 sea routes were in service at the end of FY2011, 120 of which are subsidised.a According to the authorities, the government subsidizes the Projects for Securing and Maintaining Regional Public Transport for secure and maintain bus and demand-responsive transport and remote island sea and air routes, which are optimal means of transport that fill regional needs are supported in those regions where the continued availability of networks of regional transport is endangered. The total value of subsidies is ¥30.6 billion.

a MLIT (2012), p. 138. Source: Information provided by the Japanese authorities.

4.128. Entry into the port transport sector requires permission from MLIT, and port transport charges are subject to prior notification procedures. However, licensing requirements and an economic needs test were abolished in 2006 and replaced by a permission requirement system

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4.6.2 Air transport

4.129. Japan has a well-developed air transport sector with approximately 61 million international passengers, 86 million domestic passengers, and 95 million tonnes of international cargo in FY2012. There are 97 airports in service in the country but the top five account for nearly all traffic and the top two for over half: Narita International Airport accounted for 62.2% of international passengers; and Tokyo International Airport (Haneda) for 63.8% of domestic passengers. After several years of declining domestic traffic and fluctuating international traffic, the increase in passenger numbers in FY2012, particularly the number of international passengers which was the highest ever, was partly credited to the increased activities of low-cost airlines.84

4.130. In 2008, the Airport Law of 1956 was amended to apply three categories of airports: corporate airports which are administered by airport companies, national airports administered by MLIT, including join use with the Japan Self Defence Force and U.S. forces; and municipal airports administered by local governments. Of the 97 airports in Japan, about 28 are controlled by MLIT.

4.131. The five international airports are:

• Tokyo International Airport (Haneda Airport) is owned by MLIT, which also operates the airside of the airport while the landside is operated by various private companies;

• Narita International Airport is owned and operated by Narita International Airport Corporation which is 100% government-owned;

• Chubu Centrair International Airport is owned and operated by the Central Japan International Airport Company 40% of which is owned by the government, 10% by local authorities, and 50% by others, including private corporations;

• Kansai International Airport and Osaka International Airport which, since July 2012, have been operated by the New Kansai International Airport Corporation (NKIAC) which was established under the Act on the Integrated and Efficient Establishment and Management of Kansai International Airport and Osaka International Airport of 2012. NKIAC is fully government-owned.85,86,87

4.132. Under the Act on Operation of National Airports Utilizing Skills of the Private Sector of 2013, MLIT began the process for the privatisation of the operation of Sendai Airport with guidelines for applications published in June 2014. The plan is to complete selection in August 2015, establish the operating right in November 2015, and to begin operations in March 2016.88

4.133. In September 2014, NKIAC selected the Qualified Project for Airport Operation of Kansai International Airport and Osaka International Airport under the Act on Promotion of Private Finance Initiative and the Act for Integrated and Efficient Establishment and Administration of Kansai International Airport and Osaka International Airport. The Project outlines the process for selecting a private business operator for the operations at the airports with the intention of

82 WTO document S/C/N/571, 5 October 2010. 83 Ports of Singapore Authority has invested in Hibiki port. 84 MLIT online information. Viewed at: http://www.mlit.go.jp/koku/15_hf_000030.html [August 2014]. 85 ICAO (2012). 86 Japan Credit Rating Agency Ltd (2012). 87 MLIT online information. Viewed at: http://www.mlit.go.jp/koku/15_hf_000033.html [December 2014]. 88 MLIT (2014).

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completing the process of selecting and granting operating rights in August 2015 and commencement of the project in January 2016.89

4.134. The Civil Aviation Bureau in MLIT is responsible for air transport policy, preparing legislation, setting standards, providing air navigation services, security, aeronautical regulation, meteorology, etc. The Bureau also sets uniform landing charges for airports it owns and approving them for others.

4.135. There are 26 commercial airlines based in Japan, including All Nippon Airways (ANA) and the flag carrier Japan Airlines (JAL) which are the seventh and eleventh biggest airlines in the world in terms of sales90 (Box 4.7).

Box 4.7 Japan's market and regulatory regime for air transport subsectors, 2014

Computer reservation services General regulatory framework No specific market regulations, hence no monopoly granted or compulsory use of a specific system. The sector is subject to the generic legislation, the Antimonopoly Act (section 3.3.4). No recent regulatory changes.

Economic characteristics All global players (Sabre, Galileo, WorldSpan, Amadeus) present on the market, two national providers: Axess (JAL) and Infini (Abacus-ANA). No detailed statistical data available.

Selling and marketing of air transport services General regulatory framework No specific regulations on the sale by foreign airlines of their tickets, no recent regulatory changes.

Aircraft repair and maintenance General regulatory framework: the Aircraft Manufacturing Industry Act does not impose any requirements on repair or maintenance of domestic planes; establishment is conditional on a non-discriminatory economic needs test. No recent regulatory changes. Economic characteristics: 11 FAA-certified and 11 EASA-certified repair stations. No detailed statistical data available.

Ground handling services General regulatory framework: self-handling and mutual handling are allowed (Aeronautics Law Article 102, 104, 113-2, 15 July 1952; Civil Aeronautics Regulations Japan Article 211, 212, 214, 222, 14 August 1952); third-party handling allowed with no quantitative threshold or limitation to nominatively designated airports. Differentiated situation with some bilateral partners (e.g. with Russia and with Uzbekistan). No recent regulatory changes. Economic characteristics: foreign third-party handlers are present in Japan, e.g. at Narita Airport, Kansai Airport, Centrair Airport. No detailed statistics data available.

Airport management services General regulatory framework: All airports are for public use; there are some airports managed by private corporations in Japan. Economic characteristics: 97 airports.

Air freight forwarding General regulatory framework: Air freight forwarding in Japan reserved for Japanese nationals; international air freight forwarding subject to approval based on reciprocity test.

Non-transport activities/aerial work General regulatory framework: reserved to national operators within Japan, prior notification procedure for foreign investment. The Civil Aeronautics Act limits a foreign representative of an aerial work service operator, or foreign voting rights or officers to less than 1/3 of an aerial work service operator (including their holding company).

Commercial aviation General regulatory framework National establishment rules: the Civil Aeronautics Act limits a foreign representative of a national air carrier, or foreign voting rights or officers to less than 1/3 of a national air carrier (including their holding company).

Bilateral agreements See Table 4.23

All cargo No specific market-access policy, the "known shipper/regulated agent" security regime was introduced in October 2005.

Charter Foreign operators of passenger charter flights require permission from the MLIT. MLIT generally permits passenger charter flights by foreign airlines, except in case of reciprocity problems.

Domestic traffic Reserved to national carriers. New entrants are not restricted. Air carriers may decide freely on routes, capacities, and prices after notifying the MLIT, except for routes and capacities to/from congested airports like Haneda, Narita, Itami, and Kansai.

89 NKIAC online information. Viewed at: http://www.nkiac.co.jp/en/concession/index.html [November 2014]. 90 Forbes (2014).

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Slot allocation According to IATA rules, planned expansion of number of slots at Narita (+30,000 by FY2014 at the earliest; current total 270,000).

Economic characteristics ANA HOLDINGS: 231 aircraft, operating revenues ¥1,601.0 billion for FY2013, no shareholder with more than 5%; JAL: 222 aircraft, operating revenues ¥1,309.3 billion for FY2013, no shareholder with more than 5%; and Nippon Cargo Airlines: 12 aircraft, turnover ¥88.9 billion in FY2013, owned 100% by Nippon Yusen Kaisha. 4 low-cost carriers: Peach Aviation (2011, ANA HOLDINGS 38.7%, first Eastern Investment group 33.3%, INCJ 28%); Vanilla Air (2011, ANA HOLDINGS 100%); and Jetstar Japan (JAL, Qantas 33% each, Mitsubishi, Century Tokyo Leasing 16.7% each); Spring Airlines Japan (2013, SPRING AIRLINES 33%, others 67%).

Source: Information provided by the Japanese authorities.

4.136. In January 2010, JAL filed for support from the Enterprise Turnaround Initiative Corporation (ETIC) and for corporate reorganization and protection from creditors.91 Following a restructuring, which included an investment of ¥350 billion by ETIC and a write-off of debt by the main creditors, reportedly of over ¥500 billion, ETIC disposed of its 96.5% holding in JAL through an initial public offering held in September 2012.92, 93

4.137. The increase in passenger numbers in FY2012 has been partly attributed to the entry of low-cost airlines94 with several low-cost carriers now operating in Japan. Official policy is to encourage their expansion through a review of technical regulations to allow faster turn-around times and through the construction of dedicated terminals.95 Expansion has also been driven by new open skies agreements (Table 4.23) and aided by the increase in capacity at some of the main airports such as Narita which has increased from 200,000 slots in 2008 to 270,000 in 2013 with the extension of one runway, and the introduction of simultaneous parallel independent departures.

4.138. Airports in Japan have been adapting to cater for low-cost airlines. Kansai International Airport has a one low-cost carrier (LCC) terminal in operation since October 2012 and a second under construction which is planned to open in the second half of 2016. Narita International Airport has built interim LCC reception facilities with construction of a LCC terminal in progress with full completion scheduled for 8 April 2015; and Naha Airport's interim LCC terminal, built by leveraging existing facilities came into operation in October 2012.

4.139. Japan has negotiated and agreed open skies agreements with eleven countries in 2012, and three in 2013. However, the degree of liberalization varies somewhat from one agreement to another and no agreement has included 7th freedom or cabotage (Table 4.23).

Table 4.23 Bilateral air transport agreements, 2014

With- Partner Date 5th 7th Cab. Coop. Desig. Pricing Capacity Stat. holding United States 25.10.2010 Yes No No Yes Multi SOE DD/ZP FD (except HND) No Korea, Republic of 22.12.2010 Yes No No Yes Multi SOE CoO/ZP FD (except HND) Yes Singapore 19.01.2011 Yes No No Yes Multi SOE CoO/ZP FD (except HND) Yes Malaysia 24.02.2011 Yes No No Yes Multi SOE CoO/ZP FD (except HND) Yes Hong Kong, China 18.05.2011 Yes No No Yes Multi SOE CoO/ZP FD (except HND) Yes Viet Nam 09.06.2011 Yes No No Yes Multi SOE CoO/ZP FD (except HND) Yes Macau, China 14.07.2011 Yes No No Yes Multi SOE CoO/ZP FD (except HND) Yes Indonesia 11.08.2011 Yes No No Yes Multi SOE CoO/ZP FD (except HND) Yes Canada 14.09.2011 Yes No No Yes Multi SOE DD/ZP FD (except HND) Yes Australia 29.09.2011 Yes No No Yes Multi SOE CoO/ZP FD (except HND) Yes Brunei Darussalam 28.10.2011 Yes No No Yes Multi SOE CoO/ZP FD (except HND) Yes Chinese Taipei 10.11.2011 Yes No No Yes Multi SOE CoO/ZP FD (except HND) No United Kingdom 20.01.2012 Yes No No Yes Multi CoI DD/ZP FD (except HND) Yes New Zealand 16.02.2012 Yes No No Yes Multi SOE CoO/ZP FD (except HND) Yes Sri Lanka 23.03.2012 Yes No No Yes Multi SOE CoO/ZP FD (except HND) Yes Finland 08.06.2012 Yes No No Yes Multi CoI CoO/ZP FD (except HND) Yes

91 JAL (2010). 92 The Economist (2012), Japan Airlines – From bloated to floated, 15 September. 93 ETIC, which was established in October 2009 as a wholly owned subsidiary of the Deposit Insurance Corporation of Japan (DICJ) was reorganized in March 2013 and renamed the Regional Economy Vitalization Corporation of Japan (REVIC). DICJ online information. Viewed at: http://www.dic.go.jp/english/e_kikotoha/e_kogaisha/index.html [December 2014]. 94 MLIT online information. Viewed at: http://www.mlit.go.jp/koku/15_hf_000118.html [December 2014]. 95 MLIT (2012), p. 158.

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With- Partner Date 5th 7th Cab. Coop. Desig. Pricing Capacity Stat. holding France 07.07.2012 Yes No No Yes Multi CoI CoO/ZP FD (except HND) Yes China 08.08.2012 Yes No No Yes Multi SOE CoO/ZP FD (except HND) Yes Netherlands 22.08.2012 Yes No No Yes Multi CoI CoO/ZP FD (except HND) Yes Sweden 11.10.2012 Yes No No Yes Multi CoI CoO/ZP FD (except HND) Yes Denmark 11.10.2012 Yes No No Yes Multi CoI CoO/ZP FD (except HND) Yes Norway 11.10.2012 Yes No No Yes Multi CoI CoO/ZP FD (except HND) Yes Thailand 21.11.2012 Yes No No Yes Multi SOE CoO/ZP FD (except HND) No Switzerland 23.07.2013 Yes No No Yes Multi CoI CoO/ZP FD (except HND) Yes Philippines 13.09.2013 Yes No No Yes Multi SOE CoO/ZP FD (except HND) Yes Myanmar 24.10.2013 Yes No No Yes Multi SOE DA/ZP FD (except HND) Yes Austria 20.02.2014 Yes No No Yes Multi CoI DD/ZP FD (except HND) Yes

Note: "5th" stands for fifth freedom rights; "7th" for seventh freedom rights; "Cab" for cabotage; "Coop" for cooperation clauses; "Desig." for designation; Multi" for multi-designation; "SOE" for substantial ownership and effective control; "CoI" for Community of Interest; "DD" for dual disapproval; "CoO" for country of origin; "DA" for Double Approval; "ZP" for zone pricing; "FD" for free determination; "HND" Haneda Airport; and "Stat" for statistics. Source: Information provided by the Japanese authorities.

4.6.3 Rail transport

4.140. Japan has an extensive rail network of over 20,000 km length carrying over 8,837 million passengers or 246,942 million passenger kilometers in 2011 (Table 4.24) making it one of the most extensive and most intensively used railway systems in the world.

Table 4.24 Railway transport in Japan, FY2011

Total length Electrified Double tracked Gauge Interurban network Traffic (million) (km) (km) (km) (mm) Total railway network 20,124 12,366 8,386 1,067 Passengers: 8,837 or 1,435 Passenger-km: 246,942 Freight companies 8,337 Unknown 1,067 Tonnes: 29.8 Tonne-km: 19,879

Source: Ministry for Land, Infrastructure, Transport, and Tourism.

4.141. There are over 100 different railway companies operating in Japan. The six passenger rail companies and one freight company formed from the breakup of the Japanese National Railways in 1987 own most of the railway lines, locomotives, and rolling stock. The six passenger rail companies in the JR Group are vertically-integrated regionally-based companies (although operating inter-regional services). Three of them were fully privatized (JR East, JR West, and JR Central). No shareholder in any of the three owns more than 5% of shares and there is no restriction on foreign ownership. The other three (JR Hokkaido, JR Shikoku, and JR Kyushu) and JR Freight are owned by the Japan Railway Construction Transport and Technology Agency (JRTT) which is an incorporated administrative agency (Table 4.25). In addition to the three passenger rail companies and the freight rail company, JRTT owns the Railway Technical Research Institute (RTRI) and the Railway Information System (JR System) which provide supporting services. In addition, JRTT's functions include railway construction, providing rail and shipping subsidies, shipbuilding, and disposing of land previously owned by Japanese National Railways.96

4.142. Since 1997, JRTT has been responsible for the construction of high-speed railways (shinkansen) which are two-thirds funded by central government, and one-third by local governments. JRTT owns and maintains the lines and leases them to the operators who own and maintain the locomotives and rolling stock.97 The lease fee is decided through negotiations between the operator and JRTT in association with MLIT based on predicted economic effectiveness, such as expected profit, where such lines are adopted.

96 JRTT (2013), p. 2. 97 JRTT (2013), p. 4.

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Table 4.25 JR Group, FY2013

Revenue from Network length Traffic Operating Operating passengers or (km) (Passenger-km million) Company revenue income freight (¥ billion) (¥ billion) Shinkansen Conventional Shinkansen Conventional (¥ billion) JR East 2,702.9 406.8 1,696.4 1,134.7 6,377.9 20,863 110,247 JR Central 1,652.5 494.6 1,214.9 552.6 1,418.2 46,930 51,070 JR West 1,331.0 134.6 780.6 644.0 4,371.7 17,618 38,277 JR Hokkaido 82.8 37.2 .. .. 2,457.7 .. .. JR Shikoku 28.0 10.2 .. .. 855.2 .. .. JR Kyushu 196.1 1.9 .. 288.9 1,984.1 .. . a JR Freight 187.8 7.8 104.2 .. 8,197.9 .. 19,300 tonne-km million

.. Not available. a JR Freight online information. Viewed at: http://www.jrfreight.co.jp/english/corporate/financials.html [September 2014]. Note: JR Freight FY2009. Source: Annual reports, Japanese authorities.

4.143. The major cities in Japan usually have an urban metro system which is usually wholly- or partly-owned by the municipality although they may also include a number of companies. In the Tokyo area there are eleven major railways, including JR East, Tobu Railway, Tokyo Metro, and Toei with a total network length of 2,658 km, 167,013 million passenger km, and revenue of ¥2,026.1 billion in FY2012.98,99

4.144. Many of the smaller regional railways around Japan are loss-making: out of 91 small- and medium-sized private railways 69 had operating deficits in FY2012. The subsidies from the government are provided to projects, carried out by regional railway operators, such as replacement of equipment to improve safety, barrier-free measures, and improvements of facilities for further convenience from the standpoint of ensuring safe regional transport modes, promoting use of regional railway services and improving regional activities. The total amount of the subsidies provided to regional railway operators was approximately 7,100 million yen

4.145. The Railway Bureau in MLIT is responsible for policy and legislation on rail transport in Japan. The principal legislation affecting rail transport is included in several laws, including:

• The Railway Business Act of 1986 (last amended in 2014) which sets out the conditions for MLIT to grant or refuse licenses for operators, charges and conditions for the use of railway tracks, passenger fares, etc.;

• The Railway Operation Act of 1900 (last amended in 2006) which provides for the development and application of technical regulations for the construction railways and the structure and operation of rolling stock as well as regulations relating to fares, passengers and freight;

• The Nationwide Shinkansen Railway Development Act of 1970 (last amended in 2011) which provides for the development of a railway network capable of carrying high-speed trains (greater than 200 km/h);

• The Law Concerning Passenger Railway Companies and the Japan Freight Railway Company of 1986 (last amended in 2014) which provided for the creation of six passenger railway companies and a freight railway company after the break-up of Japanese National Railways; and

• The Japanese National Railways Restructuring Law of 1998 (last amended in 1998) which provided the legal basis for the seven companies formed from the break-up of

98 JR East (2014), p. 66. 99 Tobu Railway is a public company, part of the Tobu Group of companies, no single shareholder having more than 5% of shares; Tokyo Metro is owned by the government of Japan (53.4%) and the Tokyo Metropolitan government (46.6%); and Toei is run by the Tokyo Metropolitan Bureau of Transportation on behalf of the owner, the Metropolitan government.

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JNR to be restructured as limited liability companies and for their possible privatization as well as to the non-railway businesses of JNR (e.g. ferries).

4.146. In addition, to the basic acts, there are several other laws relating to their enforcement or providing details for their implementation. Furthermore, in addition to MLIT several other public agencies are involved in developing rail transport policy, particularly the local authorities that are responsible for public transport in their jurisdiction. Details on the regulatory regime are set out in Box 4.8 below.

4.147. In addition to policy and preparing legislation, the Railway Bureau is also responsible for setting standards, regulation, licensing, approving passenger fares, freight, and leasing of track. Although there are no regulations on access to other companies' tracks, accounting separation is required so that access can be priced correctly.

Box 4.8 Regulatory framework for railway transport in Japan, 2012

Investment regime: Prior notification regime for inward foreign direct investment: a foreign investor must notify in advance the Minister of Finance and the minister with jurisdiction over the business to: (1) obtain 10% or more of the stock of public-listed companies, or (2) obtain the stock of non-public-listed companies. When "national security is impaired, the maintenance of public order is disturbed, or the protection of public safety is hindered", the notifier may be ordered to change the content pertaining to the inward direct investment, or to discontinue the investment (Foreign Exchange and Foreign Trade Act).

Right to operate: Railway transport operators must submit an application to MLIT, take an examination, and obtain a licence in a non- discriminatory manner.

Infrastructures ownership: Railway transport network owners must submit an application to the Minister of Land, Infrastructure, Transport and Tourism, takes an examination and obtain a licence in a non-discriminatory manner.

Liberalization of freight transport: No specific regulations, except Foreign Exchange and Foreign Trade Act.

Liberalization of passenger transport: No specific regulations, except Foreign Exchange and Foreign Trade Act.

Note: The meaning of "Railway Transport" in this context includes railway, underground railway, tramway, monorail, guide-rail system railway, etc. (Article 3, paragraph (3) of the Order on Inward Direct Investment). Source: Information provided by the Japanese authorities.

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5 APPENDIX TABLES

Table A1. 1 Merchandise exports by product groups, 2009-13

2009 2010 2011 2012 2013

Total exports (US$ billion) 580.7 769.8 823.2 798.6 715.1

(% of total) Total primary products 5.8 5.6 5.9 5.8 6.6 Agriculture 1.4 1.3 1.3 1.4 1.5 Food 0.7 0.6 0.6 0.6 0.6 Agricultural raw material 0.7 0.7 0.8 0.8 0.9 Mining 4.4 4.3 4.6 4.4 5.1 Ores and other minerals 0.9 0.7 0.7 0.9 0.9 Non-ferrous metals 1.8 1.9 1.9 1.9 1.9 Fuels 1.8 1.7 2.0 1.7 2.3

Manufactures 87.5 88.4 88.1 88.9 87.6 Iron and steel 5.4 5.5 5.7 5.5 5.4 Chemicals 10.6 10.2 10.3 9.9 10.6 5112 Cyclic hydrocarbons 0.8 0.7 0.9 0.9 1.3 5822 Other plastics, flat shapes, non-cellular and not reinforced, etc. 1.0 1.1 1.0 1.0 0.9 Other semi-manufactures 4.7 4.7 4.8 4.9 4.9 Machinery and transport equipment 58.2 59.5 58.3 59.6 57.9 Power generating machines 2.0 1.6 1.7 1.8 1.8 Other non-electrical machinery 11.5 13.8 15.4 14.6 13.5 7284 Machinery and appliances for particular industries, n.e.s. 2.1 3.3 3.4 2.8 2.5 7232 Mechanical shovels, etc., self-propelled 0.7 1.1 1.2 1.3 1.0 7285 Parts, n.e.s. of machines/appliances of 723.48, 727.21, 728.41 0.6 0.8 0.8 0.8 0.7 to 728.49 Agricultural machinery and tractors 0.3 0.3 0.3 0.3 0.3 Office machines & telecommunication equipment 13.6 12.0 10.6 10.3 9.8 7764 Electronic integrated circuits and microassemblies 4.2 4.1 3.6 3.5 3.5 7763 Diodes, transistors, etc. 1.2 1.3 1.2 1.1 1.0 7649 Parts and accessories for apparatus of division 76 1.7 1.2 1.0 0.9 0.9 7638 Sound/video recording/reproducing apparatus; video 1.6 1.3 1.1 1.2 0.8 recording/reproducing apparatus Other electrical machines 6.4 6.3 6.2 6.3 6.3 7725 Switches, relays, fuses, etc. for a voltage not exceeding 1000 V 1.0 1.0 1.0 1.1 1.1 Automotive products 17.8 19.4 18.3 20.8 21.2 7812 Motor vehicles for the transport of persons, n.e.s. 10.7 11.7 10.6 12.2 12.8 7843 Other motor vehicle parts and accessories of 722, 781 to 783 4.2 4.6 4.6 5.0 4.9 7821 Goods vehicles 1.1 1.3 1.4 1.6 1.4 Other transport equipment 6.8 6.2 6.2 5.8 5.3 7932 Ships, boats, etc. (excl. pleasure craft, tugs, etc.) 3.7 3.3 3.1 2.7 2.1 7139 Parts, n.e.s., for piston engines of 713.2, 713.3, 713.8 1.0 1.0 1.1 1.1 1.1 Textiles 1.1 0.9 1.0 1.0 1.0 Clothing 0.1 0.1 0.1 0.1 0.1 Other consumer goods 7.5 7.5 7.9 7.9 7.7 8719 Liquid crystal devices, n.e.s.; lasers (excl. laser diodes) 0.7 0.9 1.0 1.0 0.9 8841 Optical fibres and optical fibre bundles; optical fibre cables other 0.8 0.7 0.7 0.8 0.8 than those of heading 773.1; sheets and plates of polarising material; lenses, prisms, mirrors and other optical elements, unmounted, other than such elements of glass 8746 Automatic regulating and controlling instruments 0.6 0.6 0.6 0.7 0.8

Other 6.7 6.0 6.0 5.3 5.8 Gold 0.8 0.8 1.2 0.9 0.7

Source: UNSD, Comtrade database (SITC Rev.3).

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Table A1. 2 Merchandise imports by product groups, 2009-13

2009 2010 2011 2012 2013

Total imports (US$ billion) 552.0 694.1 855.4 885.8 833.2

(% of total) Total primary products 46.2 48.0 51.4 51.3 50.5 Agriculture 12.3 11.2 11.2 10.6 10.3 Food 10.5 9.2 9.2 8.9 8.6 Agricultural raw material 1.8 1.9 2.0 1.7 1.7 Mining 33.9 36.9 40.1 40.8 40.2 Ores and other minerals 4.4 5.6 5.4 4.7 4.6 2815 Iron ores and concentrates, not agglomerated 1.4 2.0 2.3 2.0 1.9 2831 Copper ores and concentrates 1.5 1.7 1.3 1.3 1.3 Non-ferrous metals 1.9 2.6 2.6 1.9 1.8 6841 Aluminium and aluminium alloys, unwrought 0.6 0.9 0.8 0.7 0.6 Fuels 27.6 28.7 32.1 34.1 33.8 3330 Crude oils of petroleum and bituminous minerals 14.5 15.2 16.6 17.3 17.5 3431 Natural gas, liquefied 5.5 5.7 7.0 8.5 8.7 3212 Other coal, whether or pulverized, not agglomerated 3.9 3.3 3.5 3.2 2.7 3421 Propane, liquefied 0.8 1.0 1.0 1.1 1.0

Manufactures 51.7 50.0 47.1 47.2 48.0 Iron and steel 1.0 1.3 1.4 1.1 1.0 Chemicals 8.8 8.8 8.8 8.3 7.9 5429 Medicaments, n.e.s. 1.4 1.3 1.3 1.6 1.5 5157 Other heterocyclic compounds; nucleic acids 1.1 0.8 0.7 0.7 0.6 5416 Glycosides; glands, etc. and extracts; antisera/vaccines, etc. 0.5 0.5 0.6 0.6 0.6 Other semi-manufactures 3.9 3.6 3.5 3.5 3.5 Machinery and transport equipment 23.0 23.3 20.8 21.5 22.7 Power generating machines 1.3 1.0 0.9 0.9 0.9 Other non-electrical machinery 3.3 3.3 3.3 3.1 3.3 Agricultural machinery and tractors 0.1 0.1 0.1 0.1 0.1 Office machines & telecommunication equipment 11.2 11.9 10.2 10.2 10.9 7764 Electronic integrated circuits and microassemblies 2.9 2.9 2.1 2.0 2.0 7643 Radio or television transmission apparatus 0.6 0.7 1.1 1.6 2.0 7522 Data processing machines, with at least processing, imput and output 0.8 0.9 1.0 1.0 1.0 units 7763 Diodes, transistors, etc. 0.3 0.5 0.4 0.5 0.9 7649 Parts and accessories for apparatus of division 76 1.4 1.3 1.0 1.0 0.9 Other electrical machines 3.8 3.8 3.4 3.6 3.6 731 Insulated wire, cable, etc.; optical fibre cables 0.7 0.8 0.7 0.7 0.8 Automotive products 1.8 2.0 2.0 2.3 2.5 7812 Motor vehicles for the transport of persons, n.e.s. 0.8 0.9 1.0 1.2 1.3 7843 Other motor vehicle parts and accessories of 722, 781 to 783 0.7 0.8 0.7 0.8 0.9 Other transport equipment 1.5 1.2 1.0 1.4 1.5 Textiles 1.2 1.0 1.1 1.0 1.1 Clothing 4.6 3.9 3.9 3.8 4.0 8453 Jerseys, pullovers, cardigans, etc., knitted/crocheted 0.8 0.6 0.6 0.6 0.6 Other consumer goods 9.2 8.3 7.6 7.9 7.9

Other 2.0 1.9 1.6 1.5 1.4 Gold 0.1 0.2 0.1 0.1 0.2

Source: UNSD, Comtrade database (SITC Rev.3).

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Table A1. 3 Merchandise exports by destination, 2009-13

2009 2010 2011 2012 2013 Total exports (US$ billion) 580.7 769.8 823.2 798.6 715.1

(% of total) America 23.2 22.4 21.7 24.2 24.8 United States 16.4 15.6 15.5 17.8 18.8 Other America 6.7 6.7 6.2 6.4 6.0 Mexico 1.2 1.2 1.2 1.3 1.4 Panama 2.2 2.0 1.8 1.8 1.4 Canada 1.3 1.2 1.1 1.3 1.2

Europe 14.0 12.8 13.3 11.2 11.0 EU(28) 12.5 11.3 11.7 10.2 10.0 Germany 2.9 2.6 2.9 2.6 2.7 The Netherlands 2.3 2.1 2.2 2.0 1.9 United Kingdom 2.0 1.8 2.0 1.7 1.6 EFTA 1.3 1.2 1.3 0.7 0.6 Other Europe 0.3 0.3 0.4 0.3 0.3 Commonwealth of Independent States 0.7 1.2 1.7 1.8 1.8 Russian Federation 0.6 1.0 1.4 1.6 1.5

Africa 1.6 1.6 1.6 1.6 1.6

Middle East 3.7 3.3 3.0 3.5 3.6 United Arab Emirates 1.1 1.0 0.9 1.1 1.2 Kingdom of Saudi Arabia 0.9 0.8 0.8 1.0 1.0

Asia 56.8 58.8 58.7 57.6 57.2 China 18.9 19.4 19.7 18.1 18.1 Six East Asian Traders 29.5 30.4 29.6 29.2 29.0 Republic of Korea 8.1 8.1 8.0 7.7 7.9 Chinese Taipei 6.3 6.8 6.2 5.8 5.8 Hong Kong, China 5.5 5.5 5.2 5.1 5.2 Thailand 3.8 4.4 4.6 5.5 5.0 Singapore 3.6 3.3 3.3 2.9 2.9 Malaysia 2.2 2.3 2.3 2.2 2.1

Other Asia 8.4 8.9 9.4 10.3 10.0 Indonesia 1.6 2.1 2.2 2.5 2.4 Australia 2.1 2.1 2.2 2.3 2.4 Viet Nam 1.1 1.1 1.2 1.3 1.5 Philippines 1.4 1.4 1.4 1.5 1.4 India 1.1 1.2 1.3 1.3 1.2

Memorandum: APEC 74.8 76.4 76.1 77.6 78.4

Source: UNSD, Comtrade database.

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Table A1. 4 Merchandise imports by origin, 2009-13

2009 2010 2011 2012 2013

Total imports (US$ billion) 552.0 694.1 855.4 885.8 833.2

(% of total) America 16.0 15.4 14.3 14.1 13.9 United States 11.0 10.0 8.9 8.8 8.6 Other America 5.1 5.4 5.4 5.2 5.3 Canada 1.7 1.6 1.5 1.4 1.4 Brazil 1.2 1.4 1.5 1.4 1.3 Chile 1.0 1.1 1.1 1.1 1.0

Europe 12.3 10.9 10.7 10.7 10.6 EU(28) 10.7 9.6 9.4 9.4 9.4 Germany 3.0 2.8 2.7 2.8 2.9 France 1.7 1.5 1.4 1.4 1.4 Italy 1.2 1.0 1.0 1.1 1.1 EFTA 1.5 1.3 1.2 1.2 1.1 Other Europe 0.1 0.1 0.1 0.1 0.1

Commonwealth of Independent States (CIS) 1.7 2.5 2.3 2.5 3.0 Russian Federation 1.6 2.3 2.2 2.3 2.8

Africa 1.6 1.7 2.0 2.3 2.2

Middle East 16.8 17.1 18.8 19.2 19.3 Saudi Arabia, Kingdom of 5.3 5.2 5.9 6.2 6.0 United Arab Emirates 4.1 4.2 5.0 5.0 5.1 Qatar 2.9 3.1 3.5 4.1 4.4 Kuwait, the State of 1.6 1.5 1.5 1.7 1.6

Asia 51.5 52.4 51.8 51.2 50.9 China 22.2 22.1 21.5 21.3 21.7 Six East Asian Traders 14.5 15.1 15.0 14.8 14.5 Republic of Korea 4.0 4.1 4.7 4.6 4.3 Malaysia 3.0 3.3 3.6 3.7 3.6 Chinese Taipei 3.3 3.3 2.7 2.7 2.8 Thailand 2.9 3.0 2.9 2.7 2.6 Singapore 1.1 1.2 1.0 1.0 0.9 Other Asia 14.8 15.2 15.3 15.1 14.7 Australia 6.3 6.5 6.6 6.4 6.1 Indonesia 4.0 4.1 4.0 3.6 3.5 Viet Nam 1.3 1.2 1.4 1.7 1.7 Philippines 1.2 1.1 1.0 1.1 1.1

Memorandum: APEC 66.5 67.0 65.2 64.5 64.3

Source: UNSD, Comtrade database (SITC Rev.3).

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Table A2. 1 WTO dispute settlement cases active 1 January 2011–31 December 2014 (reverse chronological order)

Respondent/ Status (as at Subject complainant/ 31 Dec. 2014) WTO

appellant series Request Request document document received for received consultation

Japan as respondent None Japan as complainant Definitive Safeguard Measures on Ukraine 30/10/2013 Panel composed DS468 Certain Passenger Cars 20/06/2014 Recycling Fee on Motor Vehicles Russian Federation 24/07/2013 Consultations DS463 Measures Imposing Anti-Dumping China 20/12/2012 Panel composed DS454 Duties on High-Performance Stainless 29/07/2013 Steel Seamless Tubes ("HP-SSST") from Japan Measures Affecting the Importation of Argentina 21/08/2012 Panel report circulated DS445 Goods 22/08/2014 Measures Related to the Exportation of China 13/03/2012 Reports adopted DS433 Rare Earths, Tungsten and Molybdenum 29/08/2014 Certain Measures Affecting the Canada 13/05/2010 Implementation DS412 Renewable Energy Generation Sector notified 05/06/2014 Tariff Treatment of Certain Information European Union 28/05/2008 Implementation DS376 Technology Products notified 20/07/2011 Measures Relating to Zeroing and United States 24/11/2004 Arbitration request DS322 Sunset Reviews withdrawn 03/08/2012 Japan as a third party Measures on the Importation of Live Russian Federation/European 08/04/2014 Panel established DS475 Pigs, Pork and Other Pig Products from Union 22/07/2014 the European Union Certain Methodologies and their United States/China 03/12/2013 Panel composed DS471 Application to Anti-Dumping 28/08/2014 Proceedings Involving China Measures on Atlanto-Scandian Herring Denmark/European Union 04/11/2013 Mutually agreed DS469 solution 21/08/2014 Certain Measures Concerning Australia/Indonesia 20/09/2013 Panel composed DS467 Trademarks, Geographical Indications 05/05/2014 and Other Plain Packaging Requirements Applicable to Tobacco Products and Packaging Anti-dumping and Countervailing United States/Korea, Republic of 29/08/2013 Panel composed DS464 Measures on Large Residential Washers 20/06/2014 from Korea Recycling Fee on Motor Vehicles Russian Federation/European 09/07/2013 Panel established DS462 Union 25/12/2013 Measures Imposing Anti-Dumping China/European Union 13/06/2013 Panel composed DS460 Duties on High-Performance Stainless 11/09/2013 Steel Seamless Tubes ("HP-SSST") from the European Union Certain Measures Concerning Australia/Cuba 03/05/2013 Panel composed DS458 Trademarks, Geographical Indications 05/05/2014 and Other Plain Packaging Requirements Applicable to Tobacco Products and Packaging Certain Measures Relating to Solar Cells India/United States 06/02/2013 Panel established DS456 and Solar Modules 23/05/2014 Importation of horticultural products, Indonesia/United States 10/01/2013 Panel established DS455 animals and animal products Countervailing and Anti-dumping United States/China 17/09/2012 Reports adopted DS449 Measures on Certain Products from 22/07/2014 China Measures Affecting the Importation of Argentina/United States 21/08/2012 Panel report circulated DS444 Goods 22/08/2014 Certain Measures Concerning Australia/Dominican Republic 18/07/2012 Panel composed DS441 Trademarks, Geographical Indications 05/05/2014 and Other Plain Packaging Requirements Applicable to Tobacco Products and Packaging Anti-Dumping and Countervailing Duties China/United States 05/07/2012 Report adopted DS440 on Certain Automobiles from the United 18/06/2014 States Measures Affecting the Importation of Argentina/European Union 25/05/2012 Panel report circulated DS438 Goods 22/08/2014 Countervailing Duty Measures on United States/China 25/05/2012 Panel report circulated DS437 Certain Products from China 14/07/2014

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Respondent/ Status (as at Subject complainant/ 31 Dec. 2014) WTO

appellant series Request Request document document received for consultation

Certain Measures Concerning Honduras/Australia 04/04/2012 Panel composed DS435 Trademarks, Geographical Indications 05/05/2014 and Other Plain Packaging Requirements Applicable to Tobacco Products and Packaging Certain Measures Concerning Ukraine/Australia 13/03/2012 Panel composed DS434 Trademarks and Other Plain Packaging 05/05/2014 Requirements Applicable to Tobacco Products and Packaging Measures Related to the Exportation of China/European Union 13/03/2012 Reports adopted DS432 Rare Earths, Tungsten and Molybdenum 29/08/2014 Measures Related to the Exportation of China/United States 13/03/2012 Reports adopted DS431 Rare Earths, Tungsten and Molybdenum 29/08/2014 Measures Concerning the Importation of India/United States 06/03/2012 Panel composed DS430 Certain Agricultural Products from the 18/02/2013 United States Anti-Dumping Measures on Certain United States/Viet Nam 20/02/2012 Panel composed DS429 Frozen Warmwater Shrimp from Viet 12/07/2013 Nam Anti-Dumping and Countervailing Duty China/United States 20/09/2011 Implementation DS427 Measures on Broiler Products from the notified 22/07/2014 United States Measures Relating to the Feed-in Tariff Canada/European Union 11/08/2011 Implementation DS426 Program notified 05/06/2014 Definitive Anti-Dumping Duties on X- China/European Union 25/07/2011 Implementation DS425 Ray Security Inspection Equipment from notified 26/02/2014 the European Union Anti-Dumping Measures on Shrimp and United States/China 28/02/2011 Implementation DS422 Diamond Sawblades from China notified 26/03/2013 Anti-dumping measures on corrosion- United States/Korea, Republic of 31/01/2011 Panel established DS420 resistant carbon steel flat products from Korea Countervailing and Anti-Dumping Duties China/United States 15/09/2010 Compliance DS414 on Grain Oriented Flat-rolled Electrical proceedings ongoing Steel from the United States 26/02/2014 Certain Measures Affecting Electronic China/United States 15/09/2010 Implementation DS413 Payment Services notified 23/07/2013 Anti-Dumping Measures on Certain European Union/China 04/02/2010 Implementation DS405 Footwear from China notified 17/012/2012 Anti-dumping Measures on Certain United States/Viet Nam 01/02/2010 Reports adopted DS404 Shrimp from Viet Nam 02/09/2011 Use of Zeroing in Anti-Dumping United States/Korea, Republic of 24/11/2009 Implementation DS402 Measures Involving Products from Korea notified 19/12/2011 Measures Prohibiting the Importation European Union/Norway 05/11/2009 Reports adopted DS401 and Marketing of Seal Products 18/06/2014 Measures Prohibiting the Importation European Union/Canada 02/11/2009 Reports adopted DS400 and Marketing of Seal Products 18/06/2014 Measures Affecting Imports of Certain United States/China 14/09/2009 Reports adopted DS399 Passenger Vehicle and Light Truck Tyres 05/10/2011 from China Measures Related to the Exportation of China/Mexico 21/08/2009 Implementation DS398 Various Raw Materials notified 28/01/2013 Definitive Anti-Dumping Measures on European Union/China 31/07/2009 Compliance DS397 Certain Iron or Steel Fasteners from proceedings ongoing China 18/12/2013 Measures Related to the Exportation of China/European Union 23/06/2009 Implementation DS395 Various Raw Materials notified 28/01/2013 Measures Related to the Exportation of China/United States 22/06/2009 Implementation DS394 Various Raw Materials notified 28/01/2013 Measures Affecting the Importation of Korea, Republic of/Canada 09/04/2009 Mutually agreed DS391 Bovine Meat and Meat Products from solution Canada 03/07/2012 Certain Country of Origin Labelling United States/Mexico 17/12/2008 Compliance DS386 Requirements proceedings ongoing 25/09/2013 Certain Country of Origin Labelling United States/Canada 01/12/2008 Compliance DS384 Requirements proceedings ongoing 25/09/2013 Anti-Dumping Administrative Reviews United States/Brazil 27/11/2008 Mutually agreed DS382 and Other Measures Related to Imports solution 14/02/2013 of Certain Orange Juice from Brazil

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Respondent/ Status (as at Subject complainant/ 31 Dec. 2014) WTO

appellant series Request Request document document received for consultation

Measures Concerning the Importation, United States/Mexico 24/10/2008 Compliance DS381 Marketing and Sale of Tuna and Tuna proceedings ongoing Products 22/01/2014 Definitive Anti-Dumping and United States/China 19/09/2008 Implementation DS379 Countervailing Duties on Certain notified 31/08/2012 Products from China Tariff Treatment of Certain Information European Union/Chinese Taipei 12/06/2008 Implementation DS377 Technology Products notified 20/07/2011 Tariff Treatment of Certain Information European Union/United States 28/05/2008 Implementation DS375 Technology Products notified 20/07/2011 Certain Measures Prohibiting the European Union/Canada 25/09/2007 Panel established DS369 Importation and Marketing of Seal 25/03/2011 Products Measures Affecting the Importation of Australia/New Zealand 31/08/2007 Implementation DS367 Apples from New Zealand notified 02/09/2011 Measures Affecting Trading Rights and China/United States 10/04/2007 Implementation DS363 Distribution Services for Certain notified 27/05/2012 Publications and Audiovisual Entertainment Products Measures Affecting Trade in Large Civil United States/European Union 27/06/2005 Compliance DS353 Aircraft — Second Complaint proceedings ongoing 23/10/2012 Final Anti-Dumping Measures on United States/Mexico 26/05/2006 Mutually agreed DS344 Stainless Steel from Mexico solution 08/04/2013

Source: WTO Secretariat.

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Table A2. 2 Selected notifications under WTO Agreements (1 January 2012- 7 October 2014)

WTO Document symbol and date of most Description of requirement Agreement recent notification Agriculture Article 18.2 Domestic support (DS:1) G/AG/N/JPN/191, 31/03/2014 Article 18.2 Domestic support (DS:2) G/AG/N/JPN/192, 02/04/2014 Article 18.2 Information on tariff quotas administration (MA:1) Article 18.2 Volume of imports under tariff quotas (MA:2) G/AG/N/JPN/196, 01/10/2014 Article 5.7 Volume-based special safeguard (MA:3) G/AG/N/JPN/197, 06/10/2014 Article 5.7 Price-based special safeguard (MA:4) G/AG/N/JPN/195, 28/07/2014 Articles 5.7 and Special safeguard (MA:5) G/AG/N/JPN/193, 24/04/2014 18.2 Articles 10 Export subsidies (outlays and quantities) (ES:1) G/AG/N/JPN/194, 25/04/2014 and 18.2 Article 10 Volume of food aid in the context of export subsidy G/AG/N/JPN/188, 16/07/2013 commitments (ES:3) Article 16.2 Measures concerning the possible negative effects of the reform G/AG/N/JPN/180, 20/11/2012 programme on least developed and net food importing developing countries (NF:1) Anti-dumping Article 16.4 Anti-dumping actions taken G/ADP/N/259/JPN, 22/07/2014 Article 16.5 Domestic procedures and authorities competent to initiate and G/ADP/N/14/Add.29 conduct investigation (G/SCM/N/18/Add.29), 22/04/2010 Article 18.5 Laws and regulations (and changes) G/ADP/N/1/JPN/2/Suppl.7 G/SCM/N/1/JPN/2/Suppl.7, 29/08/2011 GATT 1994 (Article VII: Customs Valuation) Article 22.2 Amendments G/VAL/N/1/JPN/2, 20/09/2013 Checklist of issues G/VAL/N/2/JPN/2, 18/09/2013 GATT 1994 (Article XVII:4(a) Understanding on the Interpretation of Article XVII) Notification of products traded by state enterprises G/STR/N/15/JPN, 11/07/2014 State trading activities Government Procurement Article XIX:5 Statistics on government procurement GPA/108/Add.4, 23/02/2012 Article XXIV:5(b) Notification of national implementing legislation GPA/W/314/Add.5, 06/02/2012 Laws and regulations (and changes) GPA/117, 22/04/2013 Article XXIV:6 Modifications to Appendix I GPA/MOD/JPN/52, 22/06/2010 GPA/W/309/Add.5, 11/02/2010 Article XXIV:6(a) Modifications to Annex 3 of Appendix I GPA/MOD/JPN/67, 09/03/2012 Modifications to Annex 1 of Appendix I GPA/MOD/JPN/66, 14/02/2012 Revised GPA Thresholds GPA/W/328, 22/04/2014 Import Licensing Procedures Articles 1.4(a) Laws and regulations relevant to import licensing No notification and 8.2(b) Article 5.3 Notification of licensing procedures and changes No notification Article 7.3 Questionnaire; rules and information concerning procedures for G/LIC/N/3/JPN/13, 03/10/2014 the submission of applications Subsidies and Countervailing Measures Article 32.6 Laws and regulations G/ADP/N/1/JPN/2/Suppl.7, (G/SCM/N/1/JPN/2/Suppl.7), 29/08/2011 Article 25.11 Countervailing duty actions taken G/SCM/N/235/Add.1, 24/04/2012 Article 25.1 Subsidies programmes G/SCM/N/253/JPN, 08/07/2013 G/SCM/N/253/JPN/Suppl.1, 17/03/2014 Article 25.12 Notification of domestic procedures and authorities competent No notification to initiate and conduct investigations Safeguards Article 12.6 Laws and regulations G/SG/Q1/JPN/8, 22/04/2010 Article 12.5 Notification of termination of safeguard investigation No notification Sanitary and Phytosanitary Measures Article 6, Notification of emergency measures (since 01/01/2012) G/SPS/N/JPN/358, 28/07/2014 Annex B G/SPS/N/JPN/352, 25/06/2014 Article 5, Notification of sanitary and phytosanitary measures 2012 – 22 notifications Annex B 2013 – 18 2014 – 38 Technical Barriers to Trade Article 15.2 Laws and regulations on the implementation and administration G/TBT/2/Add.10, 11/06/1996 of the TBT Agreement Article 2.10 Urgent technical regulations G/TBT/N/JPN/468, 25/09/2014 G/TBT/N/JPN/462, 18/08/2014 G/TBT/N/JPN/461, 28/08/2014 Article 2.9 Technical regulations 2012 – 33 notifications 2013 – 38 notifications, 1 corrigendum 2014 – 16 notifications Article 5.6 Conformity assessment procedures G/TBT/N/JPN/405, 01/08/2012 Article 5.7 Urgent conformity assessment procedures None TRIMs Article 5.1 Investment measures None

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WTO Document symbol and date of most Description of requirement Agreement recent notification TRIPS Article 63.2 Design Act, updated text IP/N/1/JPN/D/5, 24/06/2013 Trademark Act, updated text IP/N/1/JPN/T/5, 24/06/2013 Patent Act, updated text IP/N/1/JPN/P/9, 24/06/2013 Laws and regulations IP/N/1/JPN/12, 12/06/2013 Other laws and regulations IP/N/1/JPN/11, 03/05/2012 Unfair Competition Prevention Act IP/N/1/JPN/U/1, 29/02/2012 Japanese Unfair Competition Prevention Act, updated text IP/N/1/JPN/10, 24/02/2012 Article 69 Contact points IP/N/7/Rev.3, 17/02/2010 General Agreement on Trade in Services (GATS) Article III:3 Changes to laws and regulations affecting services S/C/N/659, 05/11/2012 S/C/N/660, 05/11/2012 Regional Trade Agreements Notification of regional trade agreement WT/REG309/N/1, 24/02/2012 Notification of changes affecting the implementation of a regional trade agreement

Source: WTO documents.

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Table A3. 1 Japan's tariff summary, FY2014

Non-ad Number Average Range Standard Duty free valorem of lines (%) (%) deviation (%) rates (%) Total 9,151 5.8 0-298.6 14.3 40.4 6.7 HS 01-24 2,183 13.3 0-298.6 23.8 18.9 14.0 HS 25-97 6,968 3.5 0-202.3 8.5 47.1 4.4 By WTO category WTO agricultural products 1,809 14.9 0-298.69 26.5 25.9 17.4 Animals and products thereof 232 10.1 0-50 13.1 37.1 14.2 Dairy products 64 55.4 9.7-225.6 50.8 0.0 70.3 Fruit, vegetables, and plants 495 10.9 0-237.2 18.9 15.2 3.0 Coffee and tea 62 19.1 0-92.6 15.7 11.3 9.7 Cereals and preparations 348 25.0 0-298.6 37.3 9.8 27.3 Oils seeds, fats, oil and their products 133 2.9 0-29.8 4.2 42.9 30.1 Sugars and confectionary 49 34.9 0-114.2 28.7 6.1 59.2 Beverages, spirits and tobacco 145 17.4 0-69.6 13.2 21.4 24.8 Cotton 5 0.0 0-0 0.0 100.0 0.0 Other agricultural products, n.e.s. 276 5.3 0-246 20.4 61.6 5.4 WTO non-agricultural products 7,342 3.7 0-202.3 7.9 44.0 4.1 Fish and fishery products 499 6.2 0-15 3.7 4.4 0.2 Minerals and metals 1,259 0.9 0-11.7 1.6 72.4 2.4 Chemicals and photographic supplies 1,180 2.5 0-6.5 1.8 30.8 0.1 Wood, pulp, paper and furniture 454 1.8 0-10 2.7 65.9 0.0 Textiles 1,478 5.6 0-25 2.5 4.5 14.0 Clothing 509 9.2 0-13.4 2.0 0.8 0.0 Leather, rubber, footwear and travel goods 318 16.1 0-202.3 31.7 39.3 7.9 Non-electric machinery 602 0.0 0-0 0.0 100.0 0.0 Electric machinery 314 0.1 0-4.8 0.6 97.8 0.0 Transport equipment 134 0.0 0-0 0.0 100.0 0.0 Non-agricultural products, n.e.s. 505 1.3 0-8.4 2.3 72.5 0.4 Petroleum 90 1.6 0-7.9 1.9 32.2 36.7 By ISIC sector ISIC 1 - Agriculture, hunting and fishing 671 5.0 0-246 14.8 45.6 5.1 ISIC 2 – Mining 113 0.1 0-4.1 0.8 96.5 0.9 ISIC 3 – Manufacturing 8,367 6.0 0-298.6 14.3 39.2 6.9 Manufacturing excluding food processing 6,769 3.6 0-202.3 8.5 45.7 4.5 By stage of processing First stage of processing 1,168 5.4 0-298.6 20.4 51.2 5.0 Semi-processed products 3,410 4.7 0-155 7.4 27.0 8.4 Fully processed products 4,573 6.8 0-280.9 16.2 47.6 5.9 By HS section 01 Live animals and products 710 10.6 0-225.6 21.7 17.6 10.8 02 Vegetable products 586 11.2 0-298.6 29.8 31.4 11.3 03 Fats and oils 91 4.1 0-29.8 4.5 26.4 40.7 04 Prepared food, beverages and tobacco 796 18.3 0-280.9 20.9 10.1 15.8 05 Mineral products 255 0.7 0-7.9 1.4 68.2 13.7 06 Chemicals and products thereof 1,079 2.3 0-28.7 2.3 36.5 0.4 07 Plastics, rubber, and articles thereof 296 2.5 0-6.5 1.9 34.8 0.0 08 Raw hides and skins, leather, and its 193 10.5 0-30 10.8 33.7 0.0 products 09 Wood and articles of wood 265 3.4 0-10 3.0 35.8 0.0 10 Pulp of wood, paper and paperboard 166 0.0 0-0 0.0 100.0 0.0 11 Textiles and textile articles 1,971 6.7 0-126.4 5.5 4.4 10.8 12 Footwear, headgear, etc. 105 32.6 0-202.3 49.0 5.7 23.8 13 Articles of stone, plaster, cement 163 1.2 0-8 1.7 60.7 0.0 14 Precious stones and metals, pearls 79 1.3 0-10 2.3 72.2 0.0 15 Base metals and articles thereof 844 0.9 0-11.7 1.6 71.9 3.3 16 Machinery, electrical equipment, etc. 918 0.0 0-4.8 0.3 99.2 0.0 17 Transport equipment 145 0.1 0-8.4 0.7 99.3 0.0 18 Precision equipment 271 0.2 0-16 1.5 96.7 0.0 19 Arms and ammunition 22 6.9 5.4-8.4 1.5 0.0 0.0 20 Miscellaneous manufactured articles 189 1.7 0-8.1 2.1 57.7 1.1 21 Works of art, etc. 7 0.0 0-0 0.0 100.0 0.0

Note: Excluding in-quota lines and including AVEs, as available, provided by the Japanese authorities. In case of unavailability, the ad valorem part is used for compound and alternate rates. Source: WTO Secretariat calculations, based on data from Japan Customs. Viewed at: http://www.customs.go.jp/english/tariff/2014 4/index.htm.

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Table A3. 2 Incorporated administrative agencies by government office

Cabinet Office (2) National Archives of Japan Northern Territories Issue Association

Consumer Affairs Agency (1) National Consumer Affairs Center of Japan

Ministry of Internal Affairs and Communications (3) National Institute of Information and Communications Technology National Statistics Center Management Organization for Postal Savings and Postal Life Insurance

Ministry of Foreign Affairs (2) Japan International Cooperation Agency The Japan Foundation

Ministry of Finance (3) National Research Institute of Brewing Japan Mint National Printing Bureau

Ministry of Education, Culture, Sports, Science and Technology (23) National Institute of Special Needs Education National Center for University Entrance Examinations National Institution For Youth Education National Women's Education Center of Japan National Museum of Nature and Science National Institute for Materials Science National Research Institute for Earth Science and Disaster Prevention National Institute of Radiological Sciences National Museum of Art National Institutes for Cultural Heritage National Center for Teachers' Development Japan Science and Technology Agency Japan Society for the Promotion of Science RIKEN Japan Aerospace Exploration Agency Japan Sport Council Japan Arts Council Japan Student Services Organization Japan Agency for Marine-Earth Science and Technology, Japan Institute of National Colleges of Technology National Institution for Academic Degrees and University Evaluation Center for National University Finance and Management Japan Atomic Energy Agency

Ministry of Health, Labour and Welfare (19) National Institute of Health and Nutrition National Institute of Occupational Safety and Health Organization Workers' Retirement Allowance Mutual Aid Japan Organization for Employment of the Elderly, Persons with Disabilities and Job Seekers Welfare and Medical Service Agency National Center for Persons with Severe Intellectual Disabilities, Nozominosono The Japan Institute for Labour Policy and Training Japan Labour Health and Welfare Organization National Hospital Organization Pharmaceuticals and Medical Devices Agency National Institute of Biomedical Innovation Japan Community Health Care Organization Government Pension Investment Fund National Cancer Center National Cerebral and Cardiovascular Center National Center for Neurology and Psychiatry National Center for Global Health and Medicine National Center for Child Health and Development National Center for Geriatrics and Gerontology

Ministry of Agriculture, Forestry and Fisheries (13) Food and Agricultural Materials Inspection Center National Center for Seeds and Seedlings National Livestock Breeding Center Agriculture and Livestock Industries Corporation (notified to WTO as a state trading enterprise) National Fisheries University Farmers Pension Fund

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Agriculture, Forestry and Fisheries Credit Foundations National Agriculture and Food Research Organization National Institute of Agrobiological Sciences National Institute for Agro-Environmental Sciences Japan International Research Center for Agricultural Sciences Forestry and Forest Products Research Institute Fisheries Research Agency

Ministry of Economy, Trade and Industry (10) Research Institute of Economy, Trade and Industry National Center for Industrial Property Information and Training Nippon Export and Investment Insurance National Institute of Advanced Industrial Science and Technology National Institute of Technology and Evaluation Japan External Trade Organization New Energy and Industrial Technology Development Organization Information-Technology Promotion Agency, Japan Japan Oil, Gas and Metals National Corporation Organization for Small and Medium Enterprises and Regional Innovation, Japan

Ministry of Land, Infrastructure, Transport and Tourism (19) Public Works Research Institute Building Research Institute National Traffic Safety and Environment Laboratory National Maritime Research Institute Port and Airport Research Institute Electronic Navigation Research Institute National Institute for Sea Training Marine Technical Education Agency Civil Aviation College National Agency of Vehicle Inspection Japan Railway Construction, Transport and Technology Agency Japan National Tourism Organization Japan Water Agency National Agency for Automotive Safety and Victims' Aid Organization for Environment Improvement around International Airport Urban Renaissance Agency Fund for the Promotion and Development of the Amami Islands Japan Expressway Holding and Debt Repayment Agency Japan Housing Finance Agency

Ministry of the Environment (2) National Institute for Environmental Studies Environmental Restoration and Conservation Agency

Ministry of Defense (1) Labor Management Organization for USFJ Employees

Source: Japanese authorities; and Ministry of Internal Affairs and Communications (2013), List of Incorporated Administrative Agencies (as at December 1, 2013). Viewed at: http://www.soumu.go.jp/main_sosiki/gyoukan/kanri/pdf/18_iaa.pdf .

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Table A4. 1 Special safeguard, FY2011 to 2013

Type of Date or period of HS Description SSG application FY2011 040110190 Milk and cream, not concentrated nor containing added sugar or other Volume 01/12/11 to sweetening matter, of a fat content, by weight, not exceeding 1%: 31/03/12 sterilized, frozen or treated appropriate to preserve 040120190 Milk and cream, not concentrated nor containing added sugar or other Volume 01/12/11 to sweetening matter, of a fat content, by weight, exceeding 1% but not 31/03/12 exceeding 6%: sterilized, frozen or preserved 040140190 Milk and cream, not concentrated nor containing added sugar or other Volume 01/11/11 to 040150119 sweetening matter, of a fat content, by weight, exceeding 6%: Sterilized, 31/03/12 040150129 frozen or preserved; other cream of a fat content, by weight, of 13% or more (other than sterilized, frozen or preserved) 040221119 Milk powder, not containing added sugar or other sweetening matter, of a Price 15/04/11 fat content, by weight, exceeding 5% but not exceeding 30% 040299129 Condensed milk Volume 01/01/12 to 040299290 31/03/12 040310190 Yogurt, frozen, preserved or containing added sugar or other sweetening Volume 01/07/11 to matter, flavouring, fruits or nuts (excluding frozen yogurt) 31/03/12 040390113 Buttermilk, curdled milk and cream, kephir and other fermented or acidified Volume 01/08/11 to 040390118 milk and cream, sterilized, frozen, preserved, concentrated or containing 31/03/12 040390123 added sugar or other sweetening matter, flavouring, fruits or nuts 040390128 040390133 040390138 110100200 Wheat or meslin flour Price 04/04/11, 02/05/11 110290390 Rice flour Price 29/09/11 110819099 Other starches (excluding sago starches) Price 13/02/12 110820090 Inulin Price 12/05/11, 17/01/12, 15/02/12 190120139 Mostly containing wheat and triticale preparation Price 07/10/11 190190132 Food preparations of goods of heading 04.01 to 04.04, containing not less Price 28/11/11 than 30% natural milk constituents, of the articles in dry weight, excluding whipped cream in pressurized containers, containing not more than 30% milk fat by weight 190190179 Food preparations of flour, meal, or starch, containing groats, meal, pellets Price 19/04/11, or starch of rice, wheat, triticale, barley, which total weight is more than 09/06/11, 85% of the articles, mostly containing starch (excluding wheat starch) 10/11/11, 05/01/12 FY2012 040390113 Buttermilk, curdled milk and cream, kephir and other fermented or acidified Volume 01/10/12 to 040390118 milk and cream, sterilized, frozen, preserved, concentrated or containing 31/03/13 040390123 added sugar or other sweetening matter, flavouring, fruits or nuts 040390128 040390133 040390138 040510129 Butter and other fats and oils derived from milk; dairy spreads Volume 01/01/13 to 040510229 31/03/13 040520090 040590190 040590229 040510129 Butter of a fat content, by weight, not exceeding 85% Price 14/11/12 110100200 Wheat or meslin flour Price 13/12/12, 20/12/12, 21/01/13 110290390 Rice flour Price 23/08/12, 07/01/13 110811090 Wheat starch Price 27/12/12 110814090 Manioc (cassava) starch Price 15/11/12 110819099 Other starches (excluding sago starches) Price 29/06/12 110820090 Inulin Price 27/07/12 121299190 Tubers of konnyaku (amorphophalus), whether or not cut, dried or Volume 01/12/12 to powdered 31/03/13 190120139 Mostly containing wheat and triticale preparation Price 18/07/12 190190132 Food preparations of goods of heading 04.01 to 04.04, containing not less Price 17/10/12 than 30% natural milk constituents, of the articles in dry weight, excluding whipped cream in pressurized containers, containing not more than 30% milk fat by weight 190190179 Food preparations of flour, meal, or starch, containing groats, meal, pellets Price 30/07/12, or starch of rice, wheat, triticale, barley, which total weight is more than 31/08/12, 85% of the articles, mostly containing starch (excluding wheat starch) 26/10/12, 06/12/12, 21/02/13, 04/03/13 190490130 Cereals, other than maize (corn), in grain form, pre-cooked or otherwise Price 16/10/12 prepared, of rice, containing more than 30% by weight of rice 190490290 Cereals, other than maize (corn), in grain form, pre-cooked or otherwise Price 16/10/12 prepared, of wheat or triticale FY2013 040221119 Milk powder, not containing added sugar or other sweetening matter of a fat Price 22/05/13 content, by weight, exceeding 5% but not exceeding 30% 040310190 Yogurt, frozen, preserved or containing added sugar or other sweetening Price 17/03/14

WT/TPR/S/310 • Japan

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Type of Date or period of HS Description SSG application matter, flavouring, fruits or nuts (excluding frozen yogurt) 040590190 Other fats and oils derived from milk of a fat content, by weight, not Price 26/06/13 exceeding 85％ 071310229 Peas (pisum sativum) Price 07/01/14 110100200 Wheat or meslin flour Price 24/10/13, 05/02/14 110429119 Other worked grains (for example, hulled, pearled, sliced or kibbled), of Price 24/10/13 wheat 110811090 Wheat starch Price 15/05/13 110819099 Other starches (excluding Sago starches) Price 27/08/3013, 30/09/13 110820090 Inulin Volume 01/03/14 to 31/03/14 110820090 Inulin Price 15/04/13, 20/02/14 190190179 Food preparations of flour, meal, or starch, containing groats, meal, pellets Price 27/05/13, or starch of rice, wheat, triticale, barley, which total weight is more than 31/07/13, 85% of the articles mostly containing starch (excluding wheat starch) 30/09/13, 08/10/13, 21/11/13, 21/01/14 210690119 Food preparations containing by weight not less than 30% natural milk Price 31/05/13 constituents on the dry matter

Source: WTO notifications G/AG/N/JPN/193 of 24 April 2014, JPN/186 of 26 April 2013, and JPN/175 of 25 April 2012.

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